by Jamie Holmes
Back in March, Needham & Co. released a bitcoin price target at $655 with validation following shortly afterward; now the investment advisory firm has recently revised their bitcoin price prediction upward to $848, emphasizing the deflationary nature of the digital asset as a key factor for their updated forecast.
In their Spring report, it was noted by Needham & Co. analyst Spencer Bogart that, “…we see value in Bitcoin as a “digital gold” and as a payment network that is enabling a global, open, permissionless financial system… Over the past 20 years alone the United States dollar has lost 53 percent of its value, the British pound has lost 47 percent, the euro has lost 40 percent, and the Australian dollar has lost 64 percent,”
Furthermore, the investment advisory firm has calculated that the total retail global market for retail payments will reach $67.5 trillion in 2020 and even if Bitcoin captures a tiny percentage share of this market, that will be a strong catalyst for increasing both the demand for and price of the cryptocurrency. The firm estimates bitcoin is likely to capture 0.28 percent of the retail payments market.
In the latest report, Analyst Spencer Bogart commented:
“Due to faster-than-expected adoption and improving fundamentals we are raising our Bitcoin price projection (from $655 to $848) but downgrading GBTC (to HOLD from BUY) based on the substantial premium at which shares trade relative to their net asset value. Focusing on Bitcoin, we’re encouraged that 1) adoption is trending faster than we forecasted in March, 2) fundamentals are improving, and 3) there are upcoming protocol improvements that we think present attractive optionality for the price of Bitcoin.”
Bitcoin’s transaction volume has had a compound annual growth rate exceeding 200 percent since January of 2013, according to Needham & Co. and the increasing appeal of the decentralized protocol to developing and emerging economies, particularly crisis-stricken countries like Venezuela, is also driving adoption.
The number of confirmed transactions is shown below, serves as a proxy, although imperfect, for the demand for bitcoin. Over the past two years, this number has managed to pierce above 100,000 confirmed transactions per day with this number just above 200,000 at the time of writing.
The volatility in the dollar price of bitcoin has decreased substantially, with volatility levels now more comparable to more traditional assets such as the S&P 500 index. Currently, bitcoin volatility is lower than oil prices and some tech stocks. Moreover, liquidity is improving and the fact that bitcoin exchanges run 24/7 should see this trend continue.
The latest report states:
“We see a multitude of developments throughout the Bitcoin ecosystem that are poised to move from conceptual to real over the next 3-7 months – each of which could augment Bitcoin’s features and functionality and, consequently, increase demand for Bitcoin,”
GBTC Downgraded to ‘Hold’ Rating
However, Needham & Co. downgraded their rating for GBTC, the ETF representing the value of one tenth of a bitcoin, from ‘Buy’ to ‘Hold’ as the firm reckons that GBTC’s premium price will fall. The chart below shows the monthly price action for the GBTC, showing that the market is currently near equilibrium, which is indicated by the conversion line (suggesting equilibrium at $91.25).
The technical outlook displayed below concurs with the analysis provided by Needham & Co. The conversion line is not trending in any direction, suggesting that GBTC will gyrate around $91.25 over the long term. Also, notice that volume has been falling for three consecutive months, suggesting less interest in an upside move. Support levels are seen at $74.90 and $80.10.