Don’t believe the hype. UBS analyst issues Bitcoin warning

Kevin Dennean isn't buying the argument that Bitcoin is ready to rise phoenix-like from the ashes

The recent Bitcoin price rebound does not mean the cryptocurrency will be heading back to its all-time highs of near $20,000 any time soon, according to Kevin Dennean, tech analyst at UBS.

“The argument here is that Bitcoin has gone through its bubble phase and is ready to rise phoenix-like from the ashes just as other assets and indices did in the past,” he wrote in a research note to clients.

He flagged up previous bubbles such as the Dow Jones in the Great Depression, the Nikkei in 1989, the Dotcom Boom and Bust, oil in 2008, and China’s recent stock market crash.

“We’re struck by how long it took other asset bubbles to recover their peak levels (as long as 22 years for the Dow Jones Industrials) and how pedestrian the annualised returns from trough to the recovery often are,” Dennean wrote.

“Maybe crypto bull contingents should consider what happens after the bubble, not every bubble that bursts recovers the old highs,” he added.

Beg to differ

Bitcoin is in the last stage of the bear market, the accumulation phase, according to a recent report from digital assets fund Adamant Capital.

“The current sentiment has recovered from capitulation and the blockchain shows us that Bitcoin HODLers are committing for the long-term again. This is confirmed by our drawdown and volatility analyses,” the report states.

“While lower prices are still possible, Bitcoin’s fundamentals are gaining momentum. Embraced by Millennials, its ecosystem is developing at rapid clip, both as a decentralised bottom-up disruptive technology, and as an uncorrelated, highly liquid financial asset for institutional portfolios around the world.”

The long term risk-reward ratio for Bitcoin is currently the most favourable of any liquid investment in the world. Adamant Capital reckons that it will trade in a range of $3,000 to $6,500 “after which we foresee the emergence of a new bull market”.

“Supported by over 10 years of infrastructure development, we believe the stage is set for mass market adoption in the coming five years. In our assessment, during this phase (its “Windows moment”) Bitcoin will become widely recognised as a portfolio hedging instrument and reserve asset, and will begin making significant inroads as a payment network,” the report concludes.

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