He called bitcoin’s near-term surge to $16,000, but now sees a 20% tumble


Bitcoin is unceremoniously knocking on the door of all-time highs, but the world’s No. 1 digital currency may now be due for a big pullback, says one cryptowatcher who has made a few accurate calls in the nascent sector.

Yves Lamoureux, the president of Montreal-based macroeconomic research firm Lamoureux & Co., told MarketWatch that after a steady run to its highest level since about 2018, and not far its off its late 2017 peak near $20,000, bitcoin may be poised for a downturn of nearly 20% to around $14,000, or $13,500-$13,000, on the more bearish end.

Read: Bitcoin prices surge to highest since 2018 — here’s why

Bitcoin
BTCUSD,
+1.74%

was last changing hands above $16,000, up about 2% on the day. In the year to date, bitcoin prices have climbed 124%, and have rallied 18% so far in November.

Lamoureux says he’s not necessarily guaranteeing a retreat in bitcoin but believes that the market may be primed for one. Here’s why:

  • Too many new fund and investment entrants that are unfamiliar with how to trade bitcoin

  • Bitcoin’s still tight linkage with stock moves

  • Bitcoin’s high relative dominance compared with other cryptos which tends to bode ill

The investor says that a new wave of a opportunistic players in bitcoin are apt to sell it alongside equities if stocks sink, in a grab for cash. Bitcoin is often viewed as uncorrelated with other assets, including stocks and bonds, but Lamoureux makes the case that correlations tend to tighten when the market turns bearish.

Check out: Bitcoin-linked ETF surges as cryptocurrency eyes fresh record high

“We need cryptos to decouple and we are not there yet,” he said.

Back in February 2017 when one bitcoin was valued at $994, Lamoureux forecast that the cryptocurrency would hit $25,000 over the next 10 or 15 years, and it nearly got there, touching a peak approaching $20,000 in December of that year and then suffering a stunning collapse.

In the middle of this year, he made his $16,000 call, which has turned out to be accurate too.

For its part, bitcoin’s low-key rally to two-year highs, contrasts with its breathless run-up in 2017. This time the gains are being pegged to greater adoption by mainstream players.

Indeed, PayPal
PYPL,
-1.68%

said that users on its platform will soon be able to purchase bitcoin as well as other cryptos like ethereum
ETHUSD,
+0.28%
,
Bitcoin Cash
BCHUSD,
-0.32%

and Litecoin
LTCUSD,
+5.07%

on its platform. That move is viewed as a monumental one for digital-currency enthusiasts because PayPal boasts some 346 million users and 26 million merchants.

Additionally, major investors, including hedge-fund luminary Paul Tudor Jones has become proponents of the asset, describing its recent rally in a CNBC interview as in its “first innings.

As an asset or currency, bitcoin has outpaced most of its would-be peers, gold has enjoyed a relatively mundane 23% year-to-date rally versus bitcoin’s stratospheric climb. Meanwhile, the Dow Jones Industrial Average
DJIA,
-1.08%

is up 1.5% so far in 2020, the S&P 500 index
SPX,
-0.99%

has climbed 9.1% and the Nasdaq Composite Index
COMP,
-0.65%

has rallied 30% over the period.

Only other digital currencies can rival bitcoin’s rally this year in the era of a pandemic. Ethereum’s ether is up 254% in the year to date.

To be sure, no one knows where the blockchain-pegged currency is headed and skepticism and deep-seated criticism is easily found. Many still view cryptocurrencies as an easy way to launder money rather than as a novel digital asset set to take over the world.

Bitcoin’s resurgence this year echoes its rise when it was created in 2009, as a response to outsize money printing being conducted by central banks and governments to address the 2008 financial crisis. This time. a global epidemic brought the financial system and the world-wide economy to its knees and forced investors to reassess the merits of bitcoin and other cryptos as governments dial up the spending to limit the damage wrought the pandemic.



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