After an incredibly disappointing year in 2018, Bitcoin woke from hibernation in early April 2019 and rallied with vengeance toward a yearly all-time high at $13,800. Alas, all good things must come to an end and such was the case for Bitcoin as price became overextended and began to retrace.
Bitcoin’s current malaise in the $7,800 to $8,500 range has produced a variety of price estimates on where the digital asset might go as the 2020 Bitcoin halving event approaches. This week Cointelegraph spoke to veteran trader and Bitcoin expert Tone Vays to prod his brain about the current state of Bitcoin and his thoughts on the future of the digital asset.
filbfilb: Tone, it feels like a bit of deja-vu; you’ve been calling for a descending triangle breakdown and here we are again. Last time it resulted in Bitcoin completing an 85% retracement of the parabolic advance into the low $3,000s.
A similar breakdown this time would put us back at around $5,000 which isn’t too far from the triangle breakdown target. So with this said, where do you think we are heading?
Tone Vays: I think we are headed for the low $7,000 area but if that area cannot reverse the price quickly and we consolidate there the way we are now doing in the low $8,000s then $5,000 becomes a reasonable and likely target.
FF: Do you think it’s possible we could head even lower to new 2019 lows?
TV: Yes, I am one of the few that have never trusted this run-up to $14,000 and felt it was not organic even though my good friend Willy Woo is able to explain it from a fundamental perspective of on-chain volume. I give it a 20% chance that we fall back to the low $3,000 area or even make new lows for a short period of time.
FF: What is your price expectation for the end of this year?
TV: I think the price will be around $7,500 to $8,000 at year-end but rising into that area. However, these year-end predictions only have two outcomes. Being praised for a good guess, or being made fun of for being wrong. This is what I’m thinking this moment, tomorrow it might change.
BTC/USD Daily Chart. Source: TradingView
Block reward halving
FF: I would like to ask your view on the block reward halving due to occur next year. There seems to be a new-found consensus that the Stock-to-flow modeling which implies that there is a direct correlation between a reduction in the inflation rate and price increase over time confirms that Bitcoin might be worth $100,000 sometime after the halving event. What is your view on the model? is it useful?
TV: I do like the Stock-to-Flow modelling, it makes sense but on a longer-term scale, I do not see it being useful to analyze bitcoin in the short term as its price discovery is dominated by speculators in an illiquid and immature market.
FF: $100,000 for Bitcoin seems like a tall order and it would push Bitcoin over a $1 trillion market cap. This means Bitcoin would begin to encroach on the space occupied by the Gold market.
Do you think $100,000 is achievable under the right circumstances over the next couple of years?
TV: I do think that $100,000 for a Bitcoin is achievable after this upcoming halving, but remember, we will have 4 more years until the next halving sometime in February or March of 2024.
If Bitcoin is to hit the $100,000 vicinity, it will most likely be late 2023 as speculation rises going into the next halving. Like all other unsustainable exponential rises however, I can also see it falling back down to $20,000 to $25,000 area for another major correction. Remember, the faster we rise, the harder we fall.
FF: What sort of fundamentals would be necessary to get us there from a technical point of view (developmental or other)?
TV: I am keeping an eye on several global catalysts that can drive Bitcoin’s value to $100,000 even tomorrow:
Back in 2013, we had the Cyprus banking crisis, then in 2015 the Greek banking shutdown. If similar events in Europe are to repeat I think it will drive Bitcoin sky high.
Just imagine if the Brexit vote takes place in a country actually on the Euro like Italy or Spain, their citizens will rush into bitcoin for financial safety.
The continued war on cash, tax evasion & money laundering. As more and more Developed nations try to eliminate cash and implement negative interest rates, this can drive many people into Bitcoin.
Within our own space, there is still plenty of people invested in shitcoins. I had greatly underestimated how much Bitcoin would rise in 2019 with a small group of major shitcoins like Litecoin, Ether and XRP.
Even though Bitcoin is already at 70% dominance, Ethereum still takes up another 20%. Once people fully realize how useless and unstable that project is, a mass exit out of Ether can actually drive Bitcoin very high due to Bitcoin’s low liquidity to handle a run on the Ethereum bank.
FF: The physically settled Bitcoin futures product offered by BAKKT implies that there may be some underlying demand expected by institutional players for Bitcoin exposure.
Do you think this is a ‘build it and they will come’ venture or do you think they are aware of pent up underlying demand for exposure to Bitcoin?
TV: I do think the “build it and they will come” view for BAKKT is reasonable but don’t confuse it with “launch it and they will rush to your door” like a new iPhone. I do not see a difference between physically settled futures and buying your Bitcoin from Coinbase.
If CME did physically settled futures from the start that would have been interesting, or if BAKKT created an exchange for centralized liquidity the way stocks work and turned companies like Bitstamp into brokers, that would have also been interesting.
FF: A lot of people are suspicious of the project in the sense that some speculate it could be used to manipulate Bitcoin's price. What’s your view on the product, do you think it’s overall bullish for the space?
TV: I think the best part about BAKKT is that it makes Bitcoin more financially and legally acceptable. With every regulated & respected financial institution that gets approval to work with Bitcoin it makes it harder and harder for governments to criminalize its use the way they do with cannabis in most countries.
As for direct effects, there is nothing that BAKKT is doing that has not already been offered by CME, Coinbase, Kraken, Gemini and Fidelity. Combining parts of what other companies do well into one is not innovative and does not guarantee success.
As for manipulation, this is what people say when they lose on a trade. Sure big companies will try and take advantage when they have power and that is why they should be watched by regulators, but if you want to talk true manipulation, let's talk about diamond prices. How come I can’t trade those futures in a free market like say corn, gold or Bitcoin?
FF: You’re a well-known skeptic of altcoins (to put it lightly) and you have consistently asked about their questionable legal status. Do you still think financial regulators will ultimately catch up with these projects?
TV: If I was answering this question a week ago I would have said yes, but after seeing the $24 million fine to EOS creators by the SEC as they raised $4 billion through an unregistered security of their scam token, it’s basically the green light to break the rules with a slap on the wrist and not even a warning to not do it again.
FF: Has it been damaging for Bitcoin overall?
TV: No, Honey Badger don’t care. Eventually, people will realize how dumb all these other coins are and that value will flow back into Bitcoin.
FF: Do you think Facebook’s Libra Project will ultimately navigate their way through the regulation and launch a product to the public? If yes, will it be competition for Bitcoin?
TV: I honestly don’t know, I believe that they will eventually launch it but it will not be competition to Bitcoin. It will not have any of the qualities that give Bitcoin value like unconfiscatability, censorship-resistant value, transfer and money hardness to rival gold governed by decentralization and math.
Facebook’s Libra is no different than the current financial system but instead of a government appointed officials deciding how much to print, it will be a centralized group of private companies. They will always have the ability to censor transactions and confiscate/freeze your funds if they feel like it or told to do so by the government.
FF: You seem to be all over the place. What’s the most exciting thing you’ve got lined up in the next six months?
TV: I am very excited about The Financial Summit in Bali. It’s a small event I decided to do to connect young traders with hedge funds that can take their strategies to another level.
The event also has an investing and trading education component for high net worth individuals and miners looking to navigate the financial markets. The event is almost sold out so I might need to do another one in 6 months in the Caribbean.
Besides that, we have the 2nd annual Unconfiscatable Conference & Poker Tournament coming up in Vegas on February 20-23. We will also be bringing back Understanding Bitcoin to Malta in May but no details on it as of yet.
It’s a really exciting time for Bitcoiners!