The desire to look into the future and find out which cryptocurrencies will “shoot” or at least not disappear is quite natural for an experienced trader. For an ordinary inhabitant of the planet, the crypto world remains a mystery to this day.
In 2020, the attention of investors in digital money will be focused on national cryptocurrencies, the development of the cryptocurrency derivatives market and mining. We will make a forecast and talk about these and other trends of the next year with Ronnie Moas — Founder of Standpoint Research
– Hello Ronnie, 2020 – a lot of important events are expected in it that will affect not only the capitalization of the cryptocurrency market, but also the value of individual coins. You, as an expert, can determine the main trends of the next year?
– I do not see any ‘trends’ occurring in the next year. I will leave that analysis to technical analysts and those who think they can predict future news headlines. I do not believe in technical analysis — no one has a crystal ball that can tell the future.
We had a bounce in bitcoin from the middle of December until early February. BTC jumped by more than 60% — from $6,400 to $10,500. We have since rolled over and dropped $800 in the last four days (February 14-17).
I don’t see any trends here. The market is trading exactly where it was two years ago. There was some outperformance by the altcoins recently as the ‘risk-on’ trade was flipped back (on), and people were flocking back into names that they thought were oversold in 2018 and 2019 during the crash. These are dead cat bounces in high-beta names that will under-perform if the recent (February 14-17) slide in bitcoin continues. Apparently there are many people that did not learn their lesson during the crash, and they are going back into the same names they were burned on in 2018-2019.
– CBDC’s appearance on the state agenda was largely due to the recognition of the potential of cryptocurrencies, especially stablecoins. At the same time, I would like to note that organizations such as the International Monetary Fund and the Bank for International Settlements (BIS) have repeatedly voiced that the Central Banks should start developing their own analogues of cryptocurrencies. Have you had any meetings with large bankers and what is their opinion on this?
– I don’t pay too much attention to news regarding other countries and their initiatives regarding cryptocurrencies. These headlines give credibility to bitcoin, but it is too early for me to evaluate whether or not this is a competitive threat (to BTC). The supply of bitcoin is so low that no single country can cause it significant damage in the long run. Remember, the 21 million supply cap here is actually over-stated. Only 18.3 million have been mined and half of those coins are either locked up by long-term investors or lost by people who did not protect and secure their cryptocurrency holdings.
– In October 2019, the Bank for International Settlements held the first G20 Central Banks summit to discuss the idea of a global cryptocurrency. How do you feel about the idea of creating a global cryptocurrency, can Bitcoin become one?
– I do not pay that much attention to some of the stories that you see in the news regarding bitcoin. It is impossible to follow all of the dozens of headlines hitting newswires every day. For me it is merely a lot of noise. Nothing much has changed as far as I’m concerned since I made my recommendation three years ago. That said, it is taking a little bit longer than I expected to go from point A to point B.
– All the facts tell us that the transition of states to digital currencies is one of the elements of the next stage in the development of mankind, and its appearance is already a matter of time. The crypto market survived, contrary to all forecasts of the complete failure of digital coins. Obviously, the next step will be the issue of settlements between seller and buyer. Are you aware of large trading platforms that accept cryptocurrency as payment?
– There are many businesses accepting cryptocurrency. You can do an Internet search (online) to see a list for most of those names. We still haven’t gotten to the point where there has been widespread and mainstream adoption. Businesses thinking about accepting cryptocurrency do not want to take the risk that is tied to the volatility and price swings that occur between the time they accept the crypto and convert to fiat. We are going to need a watershed moment — such as Amazon or Walmart accepting crypto. Once a few mega-cap names start accepting cryptocurrency, their competitors will have to follow suit in order to remain competitive (as we are seeing with check-out kiosks at major retailers for example (McDonald’s, Burger King, CVS, Walgreens, Target, etcetera).
– The determining success of an investment is the cost of electricity. Capacities using energy below $ 0.03 kWh are not only more profitable, but continue to operate in almost any situation on the market. The cost of energy in countries is different. Which country is more suitable for cryptocurrency mining?
– When looking for a country to mine bitcoin, you must take two things into consideration — what it costs to mine a bitcoin, as well as regulatory restrictions and environment. In China, for example, the cost of production may be low, but the regulatory risk is high.
Some countries that appear to strike a balance between cost of production and regulatory settings are Bahrain, Estonia, Canada, Iceland and Venezuela. In Bahrain, the cost of production is ~$2,000; in Iceland it is ~$5000; in Estonia ~$6,000; and ~$4,000 in Canada. Venezuela is one of the cheapest countries in the world to mine BTC, but there is political turmoil, economic depression and frequent blackouts — so you have no guarantee that you will get a consistent power supply.
Countries where regulations are light, with cold weather, cheap electricity, rich in hydroelectric power, oil and gas are usually where you will do well mining BTC. There are two lists that you should look at online when trying to determine where the best home is for your mining rigs. You must look at a list of bitcoin-friendly countries, as well as a list showing where the lowest cost of production is.
– Can the development of the crypto derivatives market, primarily based on Bitcoin, affect the cryptocurrency market in 2020?
– Bitcoin is up more than 300% since my recommendation in July 2017, and my target for 2020-2021 remains $28,000. My main concern is regulation. In fact, there was a disturbing article that was published in Forbes (online) this past weekend that may have something to do with the bitcoin drop we have witnessed this past weekend.
– Soon, in May 2020, the expected event will happen – this is Bitcoin-Halving. Again, many evaluate it as a factor in price growth. What are your predictions about this?
– With regards to the halving, it is hard to know whether this has already been priced in … or not. Five days ago, the consensus was that it was not get priced in as bitcoin climbed to $10,500 for the first time in six months. Now, my confidence has been a little bit shaken as we rolled over and dropped $800 February 14-17.
– Throughout 2020, we will see a continuation of the altcoin crisis. There are thousands of coins on the market now, but the vast majority do not have liquidity, have no value, and are not in demand. Most likely, gradually they will just disappear?
– I recently put out a 38-page report to my paying www.standpointresearch.com subscribers, and it covered the stock-to-flow method of valuing bitcoin. According to this model, bitcoin could go $50,000-$100,000 in the next 6 to 12 months. This is a way above where MY (conservative) price target is ($28,000). Stock-to-flow methodology has a wide following in the community and, oftentimes, when so many people are looking at the same price target it can be a self-fulfilling prophecy.
With regards to altcoins — I have been advising my subscribers for three years that 98%-99% of these names are risky and/or overvalued and/or scams and/or speculative. You are playing with fire if you think you are going to find a flower among all the weeds on coinmarketcap. That being said, no one likes to be left out of a party like we had with altcoins December 17 through February 13. This outperformance of altcoins versus bitcoin was significant and the returns there were 2X-3X what they were in BTC.
– If we talk about top cryptocurrencies, then the situation is strange, for example, with Ripple. The company claims that its dozens of XRP are used by two dozen corporate clients to conduct cross-border transactions. But if XRP has developed as a utility token for converting one currency to another during a transaction, then its price does not really matter. And therefore, it is not an investment asset?
– My current recommendation to subscribers who are looking to be diversified, and want to participate during altcoin season, is to allocate 20% of your cryptocurrency money to altcoins in the top 40, with the understanding that they will under-perform in down (BTC) markets and out-perform during bull (BTC) markets.
You must also remember that crypto should only be one asset in a diversified eight-asset portfolio that should include stocks, bonds, cash, gold, silver, real estate and art (collectibles).
– Ethereum is undergoing major changes on which the future of the main blockchain platform for decentralized applications will depend. The update is so large that it is unofficially called “Ethereum 2.0” and should significantly increase the scalability of the network. Given the big plans (the same transition to Proof-of-Stake and the introduction of sharding), the update will last all year and will affect the price fluctuations of Ethereum.
And yet, Buterin knows his job. Your opinion on the transition of Ethereum 2.0, how will it affect the market?
– What he derivatives market does is two-fold. It provides another mechanism for price discovery – which, in effect, lowers (price) volatility in the market place; and, secondly, it gives credibility to the industry.
– Tether, Binance Coin and other native exchange tokens, their price is determined solely by the activity of traders. What other tokens can you allocate?
– It is much easier for me to value bitcoin as opposed to altcoins, and I prefer to stick with what I know. The gold market valuation is currently 50 times what the bitcoin market valuation is, and I do expect that this 50X multiple will drop to 5X-10X in the next few years … that would put the bitcoin price between $50,000 and $100,000.
@RonnieMoas on Twitter