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‘The Bitcoin Oracle’ Maintains a $Trio,000+ Price Prediction for Bitcoin in 2017
One of the things I attempt to do here at Liberty Blitzkrieg is identify and comment upon major macro trends before they become apparent to the public at large. Sometimes these trends are positive, while other times they are decisively negative. Since I began writing publicly, I’d say the emergence and success of Bitcoin has been the most positive macro development I’ve observed. While I certainly wasn’t an “early adopter” of the technology, I did identify it and highlight its significance well before most people had ever heard of it.
My very first post on the topic was way back in August 2012, and since most of you weren’t following me back then, here it is for your enjoyment: Bitcoin: A Way to Fight Back Against the Financial Terrorists? A few weeks later, I received my very first bitcoin donations from generous readers and the rest is history. The price was $Ten.
A duo of years later, I came across serial entrepreneur Vinny Lingham far before he became known as the “The Bitcoin Oracle.” He indeed caught my attention with a two thousand fourteen post describing why the price was acting so powerless following its tremendous run the prior year. I found his thought process utterly compelling and I highlighted his thesis in the post: Guest Post: Why is the Bitcoin Price So Feeble? I continued to go after his Bitcoin writings and have published them consistently ever since.
Which brings me to today’s post. A duo of days ago, Vinny updated his thoughts for two thousand seventeen and many people are making a big fuss about his commentary that he expects bitcoin to reach $Three,000+ per BTC next year. I find this interesting, because this is not a fresh call for him. He said the exact same thing back in May, which represented a much bolder call since the price was trading below $500 (it’s at $950 today). That original forecast was covered in the post, Vinny Lingham on the Bitcoin Price – Prepare for the “Mother of All Brief Squeezes.”
In any event, Vinny is back with his latest thoughts. Below are some key excerpts, and you can read the entire original here.
As much as I’m flattered by the attention and the emergence of nicknames such “Bitcoin Oracle” (Thanks to TwoBitIdiot for coining it!). I do feel the need to make a point of two things, in particular.
Firstly, I don’t have a crystal ball, and everything I say has a certain percentage chance of either occurring or not occurring — we live in a probabilistic world, so when I make a call, it’s because I think the outcome is very likely, but that does not always mean it’s certain.
Secondly, I’m a macro dude — big picture concentrate. I don’t look at the trading charts every day (I just don’t have the time!) and even tho’ I don’t actively trade anymore, I do understand things like leverage, slippage and liquidity in markets fairly well. I don’t do technical analysis as macro factors will shift the playing field and disrupt the charts so in my opinion, they are often best used for looking back, and not forward.
Most of my calls are based upon fundamentals that I observed from my working skill of capital flows, supply & request, and other fundamental perspectives on economics, psychology, money, business, game theory and a host of other subjects — including life practices and the differences inbetween living in South Africa and the USA (capital controls, hyperinflation leading to Zimbabwe’s currency collapse, high interest rate environments, etc). If you have read my prior posts, you will find this to be the case when I lay out fundamentals for why I believe things in the Bitcoin world will play out the way I forecast or suggest. This is not wizardry or crystal ball stuff; it’s just observations that I have made from analyzing lots of disparate data and information derived from numerous sources and then attempting to figure it all out. And, sometimes I will be wrong.
The late two thousand sixteen price surge:
Bitcoin has performed particularly well over the past month, for two primary reasons. The very first is largely due to the macro economic factors — demonetization in places like India & Venezuela, geopolitical concerns over the Trump election and its influence worldwide, and most importantly, but- most misunderstood and not often cited- the latest fed rate hike which puts pressure on emerging market currencies, strengthens the dollar and in turn creates a surge in the forex/BTC trading price. This in turn creates extra foreign buying and request for Bitcoin as a forex hedge, particularly outside the US, because the price of Bitcoin in that country is rising quickly.
The 2nd factor is that after the $800 price mark was breached, there was a hollow supply interval inbetween $800 — $900 (i.e. not a lot of sellers, for various reasons which would take too long to explain in this post). This triggered an effective brief squeeze and shoved the price above $900 very quickly. We will most likely find a potentially brief period of consolidation around low $900’s, before we embark testing the four digit barrier, potentially with one or two mini spikes to the mid $900’s and then a sell off back into the upper $800’s/low $900’s as the market finds its feet after skipping a strike through the $800’s. There is also the year end influence of profit taking around December 31, but I don’t expect it to be outside these ranges.
Dollar interest rate hikes driving Bitcoin price up:
As I alluded to in the previous point, the fed interest rates influence Bitcoin to a degree that most people will not grip. This is a topic for a much longer post, so I will need to be brief here. Essentially, the higher the rates go, the higher the request for Bitcoin will be. The divergence that you see is happening because Gold has been intensely favored by Gold bugs for historical reasons (in times of crises, etc) as the go-to commodity based store of value if an economic collapse happens, etc — which was often followed by a period of low interest rates and then inflation.
Inflation is just not happening in the US, due to Quantitative Easing. As a result, Gold is still overvalued, especially if the fed now resumes to raise rates, which I expect will occur. Bitcoin will rise with an interest rate hike because unlike Gold, there is further upside in the capital value of Bitcoin, so the need for some type of yield to offset it is greatly diminished.
When the fed raises rates, emerging market economies have their currency devalued, which raises the effective price of Bitcoin for people in those markets, creating more equity value in their Bitcoins and driving up request for more. This is because the price to mine a Bitcoin is largely uniform (violet wand price, aside) in every country in the world and it’s a commodity that trades loosely across global markets — labor input costs are not germane to Bitcoin, unlike Gold. If your currency devalues, it just costs you more to mine a Bitcoin or buy a Bitcoin. The market doesn’t care how your currency is performing.
Some would argue that Bitcoins don’t provide yield similar to gold and therefore should be subject to the same price pressures that rising interest rates influence gold, but the reality is that the current market capitalization of Bitcoin is fractional to gold and so, for the time being, the expected capital appreciation of Bitcoin intensely discounts the need for a yield curve right now. This may switch in the future.
To expand on fed monetary policy a bit more, the world has been on a dollar based debt binge for assets and equity over the past eight years, with record low interest rates, which partially explains NIRP in some countries (witness RealVisionTV.com for more detailed info here). When rates rise, entities (corporates or governments) have to then make interest rate payments in USD and they then have to sell local currency in order to do that, which in turn weakens the local currencies even more — effectively attempting to close out a dollar brief position on a regular basis. This is over and above any unwinding of carry trade positions that are no longer profitable with higher cost dollars — a perverse cycle ensues. Bottom line is that rate hikes devalue foreign currencies and strengthen the dollar.
This is particularly visible in countries where entities with local currency earnings have been financing dollar denominated debts without sufficient dollar based income. Bitcoin is seen to be gaining in local currency price trading pairs, which makes it far more desirable and in effect increases request, because of upward price momentum in those currencies which creates more request for Bitcoin.
Without a doubt, Bitcoin will rise further next year. I expect to be within the $3k range by the end of next year, as I have previously forecast.
I would compare the last price spike in two thousand thirteen to $1255 as being “irrational exhuberance,” similar to the peak of the dot.com bubble — so I don’t expect another one like this again, but I could be wrong. Similarly, the tech world eventually crushed those “bubble” highs once the technology and businesses matured and built towards higher and even more sustainable highs, post 2000. Since the previous high for Bitcoin, it has been over three years.
I will write a go after up post which expands on some of the topics above in greater detail, but for now, I will summarize my expectations for next year.
What to expect in two thousand seventeen for Bitcoin:
Reasonably low volatility (for Bitcoin), maybe a duo of dips here and there, but a constant tempo of growth.
More broader industry use cases and applications for Bitcoin. My company, Civic, is building out a Blockchain based identity platform and I’m very excited about the prospects of using a public ledger for global identity management (and no, we don’t store your private info on the blockchain!).
Government sponsorship or endorsement of Bitcoin related companies and more likely, government led buying of Bitcoins or investment into Bitcoin mining companies or similar.
Potential government crackdowns on Bitcoin in certain countries, due to capital flight or loss of exchange controls. This will drive up the Bitcoin price in the black markets in those economies.
I do expect a two -3x price growth overall in two thousand seventeen for the USD/BTC pair. This may result in Bitcoin prices in other currencies being up four -7x, but I think it’s fair to say that USD/BTC pairing is what we should use as the benchmark.
Segwit will be adopted to treat scaling.
What NOT to expect in two thousand seventeen for Bitcoin:
Parabolic growth (not 20x) (i.e. Bitcoin $10k is very likely not going to happen in 2017)
A hard fork. We all eyed what happened with Ethereum so I would give this a 5% chance of happening.
Consumer adoption — this is still trailing, and I don’t believe we’re going to see mass adoption of Bitcoin as a currency of any sort by average consumers. I would still argue that Bitcoin is a commodity today, not a currency. That will switch in time.
Eventually, I want to conclude with a little Bitcoin humor courtesy of r/bitcoin:
For extra articles by Vinny I’ve highlighted previously (from oldest to most latest), see:
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