Turning bullish on cryptocurrencies (again)

Watch out for the Bitcoin rebound

Earlier this February I had written a post about cryptocurrencies, in which I had been very bearish and — to date — I have been spot on.

I want to make an update today, as my opinion has changed: I do think we have seen, or are about to see, the bottom of the crypto market! We may be entering a positive period of reinvestment.

Mostly, I am bullish on Bitcoin and EOS (with full disclosure, via my Cryptology Asset Group I am one of the shareholders of Block.one, the company that created EOS and still holds 10% of it).

Reasons why I am bullish for Bitcoin now:

Valuation: As mentioned in my paper, Bitcoin has not many practical use cases except of being a store of value and a parallel financial system that is transparent and finite. Now at current valuation levels, I think the market cap of Bitcoin is covered by that one use case and not completely exaggerated (as it used to be).

New technologies driving adaption: Although I still consider the practical use case of Bitcoin to be limited, some new technologies such as the latest announcement of mobile payment processor Square Inc. allow some everyday functionality. The new patent of Square allows merchants to accept cryptocurrency payments, which could hasten the adoption of digital assets among consumers and businesses. Even more important, Square’s patent not only allows merchants to accept cryptocurrencies, it also purports to eliminate latency in blockchain transactions. This is described in my paper as one of the big issues of mining-based blockchains. The patent details a system whereby bitcoin and other crypto payments will be processed at roughly the same speed as credit card transactions. This will be accomplished through a private blockchain that records real-time transactions made through Square’s wallets.

New money to come in: There are huge pools of capital on the sidelines which have either sold at the highs, and want back in, or haven’t been in yet, and are eager to join. In particular, some top tier endowments have started positioning themselves “secretly” through investments in crypto funds. Hence, the word is not out yet, but if it becomes broadly known that top tier endowments have begun recognizing this asset class, it will trickle down through the institutional world.

Custody problems about to be solved: So far, one major problem pertains to custody issues. Over the last months I have seen a few solutions which should comply with the demands of institutional investors. Hence, this burden is about to be eliminated as well.

Shorts get covered: From a momentum point of view, shorts are at historic highs. However, first short sellers are starting to close their positions.

As Bitcoin is the “lead” currency, a rise of Bitcoin should positively influence the other tokens as well. Unfortunately, I don’t think the market is at a point where it has (fully) established a valuation method for tokens. Therefore, it cannot fully distinguish between the various token and business models (please see my original post about the wide variety of “business models” or “ecosystems” tokens can represent). However, I think this will happen over time, which will make certain tokens outperform others. My big bet here is on EOS.

As you can read in my original post, I regard EOS as a far superior version of Ethereum and other platform tokens. The upcoming large projects on EOS over the next 6–9 months should proof that claim. This should positively influence the (relative) value of EOS over time.

The usual disclaimer: Apeiron Investment Group Ltd. (Apeiron), Cryptology Asset Group PLC (Cryptology) and/or Christian Angermayer (CA) cannot accept any liability for the accuracy or completeness of this summary, any opinions expressed, or any forward-looking statements included. Please note that Apeiron, Cryptology and/or CA may hold significant positions in stocks and crypto assets which might be discussed in this text and also may buy and sell those stocks/crypto assets, so Apeiron, Cryptology and/or CA are biased and conflicted. Any views expressed are personal and private opinions only and shall not be deemed as a recommendation to buy or sell stocks or any other assets.

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