Despite Bitcoin’s recent price increase after a short-term dip, going roughly from $6,700 to $9,330 in the past month, some famous Wall Street analysts do not believe that now is the time to buy Bitcoins.
Nick Colas, DataTrek Research co-founder, famously referred to as the first Wall Street Bitcoin analyst, has become cautious about investing in Bitcoin and advises investors to avoid it.
In an interview with CNBC, he stated that since the price of bitcoin has fallen in the first quarter of 2018 “quite a long way… we’re getting a lot of people asking is now the right time to buy.”
“The short answer is no,” he argued, for two fundamental reasons.
1. Lack of New Adopters
First of all, “we’re not seeing a lot of incremental engagement with people interested in buying Bitcoin for the first time,” Colas said. “Like any new technology, you need new adopters to come in and make it more valuable.”
Colas identified a considerable drop in interest in 2018, arguing that “in terms of Google searches, they are way down from the peaks back in December and January — like 85 to 90 percent.”
Moreover, Colas added that “we’re also not seeing a lot of wallet growth – growth in wallets is just 2.2 percent last month, it was 5 to 7 percent per month all of last year,” further highlighting a decreasing interest from the public in cryptocurrencies in general.
“We’re just not seeing the kind of engagement we need to see to make us feel like Bitcoin really has a solid track higher here fundamentally,” he said.
A major issue with all cryptocurrencies is the volatility in prices, making any investment a risk. The volatility has even been apparent in the last month, Colas said, “with the price falling as much as it has.”
“In retrospect, it (bitcoin) was absolutely a bubble based around the futures launch in December and a lot of enthusiasm for the asset,” he stated. But furthermore, “we fundamentally believe in the structure of this technology and the story, but it obviously has huge price volatility around it.”
Despite his warnings, Colas identifies a clear correlation between bitcoin prices and other altcoins. While Bitcoin prices recover, he argued that this will have a positive impact on other less well-known cryptocurrencies: “right now, bitcoin is that market leader… so when it rallies, the other members of the group – the Ethereums, LiteCoins and Bitcoin Cashes of the world – tend to get pulled up as well.”
Indeed, the analyst believes that the key to seeing a rise in prices is the real-world application and usage of the currency, which will encourage more people to buy Bitcoin. Recently, more and more companies have started introducing cryptocurrencies into their businesses, with Goldman Sachs announcing its launch of a bitcoin trading desk. With the growing demand from clients for Bitcoin as an alternative store of value, executives at this large financial institution agreed to support bitcoin trading.
Therefore, other analysts have argued that prices may continue to rise in the short-term and gain public support. Brian Kelly, Founder and CEO of BKCM LLC, an investment firm focused on digital currencies, has underlined major factors that could trigger the next rise in bitcoin prices.
He argued that Bitcoin could see a rise to $12,000 or even $14,000 for three reasons: the first being the entrance of Goldman Sachs into cryptocurrency trading. This could bring new liquidity to the market as it could introduce cryptocurrencies as a new asset class to investors in the traditional finance sector.
The other two factors is the clarity from regulators on Bitcoin’s legality, specifically from SEC, and the start of the blockchain week on May 14 in New York.
Thus, despite Bitcoin levels potentially rising past $10,000, analysts are torn in opinion on whether to invest in the cryptocurrency or not. Colas stands by his opinion, warning against purchasing more Bitcoins as he believes that the risks of losing money are too high.
Featured image from BB Originals