Bitcoin’s Hard Fall Could Trigger FOMO-Inspired Bull Market, Analyst Says
Bitcoin’s precipitous drop over the last four months has been well documented. But what is less known is the price point at which traders will be encouraged to re-enter the market over “fear of missing out,” or FOMO. According to Naeem Aslam of Forbes, the magic number could be $4,000.
Bitcoin: $35,000 by Q4
In a recent article, Aslam argued that bitcoin was destined to rise to $35,000 by the fourth quarter as FOMO-inspired gains drive prices beyond the previous peak. Although bitcoin has lost much of its luster, price points of around $4,000 would bring a large number of buyers back into the market.
The world’s largest cryptocurrency has struggled below $7,000 for the better part of two weeks, with prices coming close to triggering a bear-market reversal. Bitcoin’s most recent low of around $6,425 came on Apr. 1. That level has provided the baseline of support ever since.
For Aslam’s prediction of 400% growth to hold merit, bitcoin’s recovery probably needs to begin sometime soon. History is on the side of the bulls during the second quarter, as investors shake-off what’s normally a slower Q1.
Bitcoin found support around $6,800 on Tuesday, and was last trading around $6,880. Its total market cap now stands at $116.6 billion, based on latest available data.
Bitcoin Rally: An Infectious Disease
That said, not everyone is convinced of bitcoin’s bullish upside. Analysts at Barclays have compared bitcoin’s improbable run in 2017 to the spread of an infectious disease. Using epidemiological studies, the bank’s economists developed a model for bitcoin that assumed more investors had grown “immune” to the digital asset class.
“As more of the population become asset holders, the share of the population available to become new buyers — the potential ‘host’ population — falls, while the share of the population that are potential sellers (‘recoveries’) increases,” the economists said in a note to clients.
Under this view, bitcoin’s soaring value through December was akin to the spread of “infections,” only in this case, from one buyer to another. They also predicted that bitcoin’s high near $20,000 was likely the ultimate price that could be achieved for the cryptocurrency. That’s because those “susceptible” to the bitcoin bug had already exited the market.
Barclays adds: “This occurs with infectious diseases when the immunity threshold is reached; ie, the point at which a sufficient portion of the population becomes immune such that there are no more secondary infections.”
Arguments for or against bitcoin’s resurgence are tied to an underlying belief over the future of cryptocurrency. The bearish case for bitcoin is often based on the crypto market’s speculative nature, not to mention increased regulatory risks and limited adoption at the consumer level. The bulls, on the other hand, highlight growing institutional adoption, advances in security and scalability and markets where the cryptocurrency is universally accepted.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.