Bitcoin: Price Analysis

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  • July 1, 2019
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This comprehensive summary gives an overview of the Bitcoin Price Analysis based on the findings of Kintaro Capital. You can find the full report here.

The price of Bitcoin (BTC) has finally started to show signs of positivity following the havoc that happened in early 2018 which saw it massive collapse, falling approximately 90% from the highs. This raises two questions to investors:

  1. Is Bitcoin still a viable asset?
  2. When will the next bull run be?

We have tried to explain the thinking process in this article as to why we believe a bull run is imminent and the time to enter the market is now.

This article will give a glimpse of what you can expect in the short term as we try to uncover the key aspects relating to the fundamentals and price action of BTC over time. We used the NVT signal which is specific to the cryptosphere to get a good approximation for when to enter/exit in BTC.

First, to address the issue concerning Bitcoin as a viable asset, we decided to analyse its store-of-value potential. We believe that BTC’s Proof-of-Work will ensure that Bitcoin remains a highly secure store-of-value as it still holds more than 90% of the hash power of coins with a similar technological structure.

To further test its store-of-value, we also tried to compare BTC with gold by using relevant parameters that we feel suit this comparison. We concluded Bitcoin is superior to gold on all the considered points in Table 1. Thus, we believe Bitcoin (or a newly developed superior coin in the long term) can potentially replace gold as the go-to store-of-value of the world.

Comparison between Bitcoin and Gold based on liquidity, scarcity, transparency, storability, transferability, immunity to central banks and inflation

Table 1: Comparison of Bitcoin with Gold based on relevant parameters
Source: Kintaro Capital analyst report, Konfidio research

Secondly, with respect to the current price action, we expect that the BTC bull run will strengthen between May 2019 at the earliest, and September 2019 at the latest, by analysing the BTC bull and bear cycles and the resulting Bitcoin bubbles that have occurred in the past.

Finding consensus by analysing 3 major cycles of the Bitcoin/Crypto market from a fundamental, technical and business model perspective makes us believe that we are in the bullish direction at the moment and currently we are in the 4th cycle, as shown in Chart 1. By comparing the length of the bulls and bears of previous cycles, we deduced that the recent BTC bull run shall consolidate in September 2019.

Bitcoin Price and cycles Since 2011
Chart 1: Bitcoin Price and cycles Since 2011
Source: TradingView at 21.05.2019, Kintaro Capital analyst report

An interesting observation between the BTC price movements and the halving of BTC suggests that there is more upside potential for BTC during 2020 as all previous halving has led to an acceleration in BTC price, as shown in Chart 2. The reason for this is that every halving decreases the amount of new Bitcoins generated per block. This means the supply of new bitcoins is lower. Lower supply but steady demand usually leads to higher prices of the asset of concern. Thus, halving preceded some of Bitcoin’s largest runs. The next halving is scheduled in May 2020, which means the next BTC bull cycle is highly likely to be in progress before May 2020 and BTC price shall continue to rise and overcome the ATH in mid to late 2021.

Bitcoin Price with dates of halving identified
Chart 2: Bitcoin Price, with dates of halving identified
Source: TradingView at 21.05.2019, Kintaro Capital analyst report

In order to have a price estimate for the future, we also compared in detail the BTC bubble in December 2017 with the bubble to see breadth and depth of the BTC’s bull run. The BTC bull run will take only 20% of the time it took for the bull run to reach the all-time high of the market. Thus, we estimate that BTC will recover and will surpass its ATH in late 2021. While we argue in April 2019 that the bull run is imminent with a probability of above 80%, we believe that the BTC all-time high (ATH) shall be surpassed by mid to late 2021, with a 9-month margin of error in both directions. Having explored these criteria in detail we cautiously predict a 50k price target by 2022-2023.

Qualitative comparison between the Crypto bubble and the bubble
Table 2: Qualitative comparison between the Crypto bubble and the bubble
Source: Kintaro Capital analyst report

Looking into the short-term trends using technical analysis, we used the most popular method in the crypto space, the Network Value to Transactions (NVT) ratio, Chart 3 shows that BTC is currently overvalued. This gives us a better picture of where the price action is heading with respect to all the changes in the crypto market. The growing popularity of fake volumes poses a major threat in understanding the dynamics of BTC prices which is also explored in the report.

Chart 3: Natural logarithm of BTC’s USD price against the NVTS ratio
Source: Kintaro Capital analyst report

Overall, considering all the observations presented in the article, which recalls our findings in the Kintaro Report, and with the technical analysis supporting the price actions we firmly believe in the value of BTC as an asset class and its greater potential in the future.

Learn more about the Bitcoin Price Analysis from the Kintaro Capital full report