The digital currency has had a difficult run since hitting its all-time high, sinking from its peak near $20,000 per coin in late 2017 to its current trading price of less than $4,000. The CME bitcoin futures curve is up nearly 6 percent year to date but has also fallen significantly from the 2017 peak.
But Fundstrat Global Advisors strategist and known bitcoin bull Tom Lee — who in December valued bitcoin between $13,800 and $14,800 — says this year could bring about a comeback for the cryptocurrency, thanks to favorable macroeconomic trends.
“I think 2019’s a year about repair,” Lee said Thursday on CNBC’s “Futures Now.” “We have a risk-on rally in global markets that’s positive for bitcoin; it was a headwind last year. And the dollar isn’t surging like it was last year. That’s a headwind that’s gone away.”
And while Lee also noticed that bitcoin’s technical indicators are stabilizing, with the digital currency managing to hold above its 200-week moving average, his thesis centered on the bigger picture.
“The real story is the fundamental one, that bitcoin’s becoming quite useful,” he said. “We’ve seen the launch of digital currencies by not only J.P. Morgan and Mizuho Bank, but also Facebook and some social media companies gearing up. And, of course, in places like Venezuela, where bitcoin’s become very large and widely used, turmoil is causing adoption growth. So I think these are really setting up for a strong … year.”
Increased awareness around cryptocurrencies may also bring them closer to becoming an official asset class, a shift that is already starting to take shape, Lee said.
“Fidelity’s launching digital custody. Bakkt is going to launch an exchange. We’ve already seen some high-profile endowments, and pension funds actually invest new money this year,” he said. “So I think, as an asset class, it’s still the earliest days, but I think it’s too glib to dismiss the macro.”
For the near term, Lee told prospective buyers to keep an eye on the 200-day moving average. If bitcoin maintains its current trading price around $4,000, “it’ll cross above its 200-day by August,” which could help it regain the ground it lost during its price collapse in late 2018, Lee said.
“I think the damage that needs to really be repaired is that collapse from $6,000 to $3,100, which came after the fork wars with Bitcoin Cash,” he said. “I think it really undermined investor confidence in sort of the dynamics around the market, so I think that bitcoin’s going to spend a lot of time below $6,000 sort of fixing itself.”
But that might not take too long, Lee said: “I think the outside window is five or six months before bitcoin starts to look technically like it’s back in a bull market.”
Disclosure: There is a possibility that Tom Lee and/or Fundstrat will from time to time have long or short positions in, and buy or sell, the securities or derivatives referred to in his research.