After hitting its lowest levels since May, Bitcoin is looking for its next leg, as traders and investors are looking for signs of a protracted pullback or a quick pivot to the upside.

CNBC contributor Brian Kelly, the chief executive officer of digital currency investment firm BKCM, breaks down where he sees Bitcoin going from here – up.

“I think the good odds are that this week and this sell-off here was an important low. I think there’s a couple different things going on…

China is cracking down. There was some speculation that China might unban some of the cryptocurrency trading. But if you look at the fundamentals underlying Bitcoin at this point in time – I look a lot at addresses and address growth. What we’re seeing over the last 30 days is we’re seeing growth in addresses of about 5% but the market is pricing in a decline in addresses of -3%.

So it’s mispriced here. Fundamentals are improving on a sell-off. So I think that’s why the odds are stacked that this is probably a low.”

“If you look at any currency, it works just like a social network. It’s the network effect. You want to have new users. So when I look at addresses, you think about those as MAU (monthly average users) that we look at for Facebook or for Twitter or for that type of thing. If you see those increasing, those are positive fundamentals, and that’s what’s happening in this case.”

Kelly also points to a fundamental shift in Bitcoin markets.

“The global macro players have been in Bitcoin more than they ever have been. More and more, it is starting to be a macro trade. We saw a lot of activity around the Brexit votes. We saw a lot of activity around some of the ECB [European Central Bank] and the FOMC [Federal Open Market Committee] meeting…It is getting a lot more correlated with the global markets.”

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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