Wall Street Analyst Cautions Against Buying Bitcoin Right Now

A prominent Wall Street analyst covering the cryptocurrency market has cautioned traders to avoid bitcoin for the time being, arguing that the fundamentals do not support continued growth for the digital asset.

Bitcoin: A Waiting Game

In a recent interview with CNBC’s Trading Nation, Nick Colas of DataTrek Research argues that lackluster fundamentals offer little hope for a sustained recovery in bitcoin prices over the intermediate term.

“It has come down quite a long way, and we’re getting a lot of people asking is now the right time to buy,” Colas said. “The short answer is no.”

Colas called bitcoin the “FANG stock of the crypto world,” a clear reference to the most widely traded technology stocks Facebook, Amazon, Netflix and Alphabet’s Google.

Though Colas is urging caution, he isn’t necessarily bearish on bitcoin. Rather, he maintains that the record-setting rally of December was “absolutely a bubble based around the futures launch.” In the intermediate term, there’s not much evidence that bitcoin has a lot of first-time buyers who are keen to enter the market.

“Like any new technology, you need new adopters to come in to make it more valuable.” he said. “Then, we have a solid trek higher. Then, interest will reengage.”

In his view, the so-called “HODLers” will have their work cut out for them, as the waiting game for interest to reemerge could be three-to-five years.

Competing Views

Colas’ view runs contrary to several prominent analysts who expect bitcoin to reach new record highs this year.

Fund manager Thomas Lass has offered compelling cases for holding bitcoin, including an analysis of price trends using Metcalfe’s Law. Then there’s the obvious reason: the vast majority of bitcoin’s gains in any given year occur over a handful of days.

Billionaire venture capital investor Tim Draper has set a price target of $250,000 per bitcoin by 2022. Though difficult to imagine now, Draper was the one who called for $10,000 bitcoin in 2017 – a forecast he made all the way back in 2015.

Even if you don’t think bitcoin will rally past record levels this year, it’s reasonable to believe prices have already bottomed, according to Dan Morehead of Pantera Capital. In Morehead’s view, the bear cycle has come to an end and bitcoin’s darkest days may have already passed.

Proponents of bitcoin’s bullish ascent have placed price targets of between $20,000 and $25,000 by year’s end. In their view, BTC is an excellent store of value that exhibits unique price independence as an non-correlated asset. Non-correlation works in favor of bitcoin as appetite for risk-on assets like stocks continues to decline.

Bitcoin prices declined on Sunday, failing to extend  a bullish rally north of $10,000. At the time of writing, the digital currency was valued at $9,562 for a market cap of $162.8 billion. While bitcoin continues to be the biggest influencer of overall market trends, its impact has steadily declined amid the latest bullish reversal. According to CoinMarketCap, alternative cryptocurrencies now represent nearly 64% of the market.

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.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi