When it comes to Bitcoin bulls, there isn’t anyone who is as optimistic as Fundstrat’s Tom Lee. And with a recent appearance on CNBC, Lee has only cemented this theme, drawing attention to indicators that could indicate that Bitcoin bears are losing steam.
Fundstrat Analyst Remains Bullish, Even After Eight Months Of Bearish Price Action
Where’s Bitcoin headed next? That’s the question that has been weighing on the minds of crypto investors worldwide. Tom Lee, the head of research at Fundstrat Global Advisors, recently appeared on CNBC’s “Fast Money” segment to discuss his outlook on this market.
Lee, dubbed “Wall Street’s biggest Bitcoin bull” by some, debuted his time on the show by drawing attention to a throng of positive indicators. Alluding back to the countless number of appearances he made on Fast Money, the permabull noted that the break-even cost of mining, along with favorable “network efforts” still heavily drive Bitcoin’s value. Anyhow, he then unexpectedly brought up a macro market indicator, and although it has no direct correlation to crypto, Lee sees it as Bitcoin’s next “leading indicator.”
The macro indicator in question compares the performance of the MSCI Emerging Markets Index, which measures the value of equity markets in global markets, and the US-based S&P 500. Lee went on to put the aforementioned indicator and Bitcoin’s logarithmic chart side-by-side, in a bid to show CNBC viewers that connections can be drawn between these two charts. As Bitcoin rocketed in value last year, so did the MSCI Index, albeit not exponentially. This seemingly isn’t a one-ended relationship, with Bitcoin undergoing a trend reversal as the macro indicator hit its peak in early-2018.
Although this could be an untimely coincidence, the Fundstrat research guru revealed why this indicator should be of interest to crypto investors. Lee stated:
“So why do we think they’re connected? Well, there is two factors. The first is hedge funds — see hedge funds typically rent emerging market stocks. So they do risk-on, risk-off. So when they’re risk-off, Bitcoin also suffers because they are risk off. The second reason has to do with wealth effect. Wealth effect means that if you are living in an emerging market, and you see your stock market fall hugely, that you will have a lot less money to buy Bitcoin.”
In other words, the Fundstrat executive believes that as emerging markets underperform, so will Bitcoin. Later speaking on market conditions, Lee added that the trading ecosystem “has shifted,” which has drawn ambitious macro hedge fund managers to BitMEX, where margin trading is a dime a dozen.
Additionally, he noted that funds are beginning to hire crypto-friendly, talented individuals straight out of college, which may play a role in a hedge fund’s decision to look into crypto. So for now, the permabull noted that hedge funds will continue to dominate the trading landscape until the market gets other fiat on-ramps.
Tom Lee: The Misery Index May Be At 36, But Bitcoin Is Still Ready To Roar
Concluding his time on the show, Lee brought up Fundstrat’s Bitcoin Misery Index, which aims to calculate the overall sentiment of crypto traders on a scale from zero to 100. As it stands, the misery index sits in a “very miserable zone”, at 36/100. He attributed this low figure to the SEC’s near-rejection of nine Bitcoin-backed ETF proposals, along with these Chinese government’s moves to curb the development and propagation of crypto.
However, as incessantly noted by the analyst, the misery index can often be seen as a contrarian indicator, where a low figure reported by the index may often be a precursor to a short to mid-term Bitcoin rally. CNBC host Melissa Lee closed off this episode’s crypto segment asking Tom Lee about his $20,000 price prediction. Remaining ever so bullish, he stated:
“It only takes ten days for Bitcoin to see all its returns in a year. So I still believe that ($20,000 by the end of 2018) is possible.”
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