Bloomberg Crypto Outlook – September 2019 Edition

Bloomberg Terminal
Indices
Bitcoin Becoming Boring
‒ Bitcoin Getting Boring? Better Get Used to It, Just Like Gold
‒ Primary Bitcoin Companions Have Their Swords Out for the Bulls
‒ With Good Support and Resistance Overhang, Bitcoin May Turn Dull
‒ The Bitcoin and Cryptocurrency Future: Digital Gold, Stability

CONTENTS
2 Overview
2 Unfavorable Bitcoin Companions
3 Meh Technical Indicators
4 Future - Bitcoin & Stability

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Bloomberg Crypto Outlook – September 2019 Edition

Data and outlook as of September 4 Learn more about Bloomberg Indices

Mike McGlone – BI Senior Commodity Strategist

BI COMD (the commodity dashboard)
Note ‐ Click on graphics to get to the Bloomberg terminal

Bitcoin Getting Boring? Better Get Used to It, Just

Like Gold Transactions More Consistent With $8,000 Bitcoin
Performance: Bloomberg Galaxy Cypto Index (BGCI)
August -16.1%, 2019 +52.0% thru September 5
Bitcoin August: -4.0%, 2019 +187.2% thru September 5

(Bloomberg Intelligence) -- Bitcoin is maturing into a digital

store-of-value akin to gold, which tells us its parabolic rally
days are over. Declining volatility in the seminal
cryptocurrency should be a matter of time, and with the
initial transition from last year's swoon past, the rest of this
year is prime for restrained trading. Layers of price support,
increasing institutional interest and macroeconomic
conditions similar to those aiding gold should keep bitcoin's
price buoyant. Too much rally too fast and Bitcoin will
regress toward a highly speculative digital asset, similar to
the 2,600-plus cryptos.

Our crypto analysis is increasingly focused on what matters:

Bitcoin. An extended hangover is expected for most of
others. The markets beta to Bitcoin should continue to
increase on the way down and decrease when bitcoin is
rising.
Unfavorable Bitcoin Companions
Primary Bitcoin Companions Have Their Swords Out for
the Bulls. Some key Bitcoin price indicators don't support
further price appreciation in the near term, which is a greater
negative for the broader market. Sharp pullbacks in
transactions and active-address counts portend a prolonged
consolidation period for the first-born crypto.
Falling Addresses Signal Bitcoin-Bull Caution. A sustained
price recovery is unlikely, at least in the near term, if the
sharpest downturn in Bitcoin addresses used since the 2018
bear market is a guide. The 30-day average of addresses
from Coinmetrics is higher in 2019, but the recent backup
suggests prices will remain restrained, in our view. Unlike the
more price-correlated transactions measure, addresses are
just a general guide. The broader market, as measured by
the Bloomberg Galaxy Crypto Index in our graphic, appears
at greater risk to declining Bitcoin addresses.
Recovery Thrill is Gone - Plunging Addresses

More Back-and-Fill for Bitcoin Transactions. The sharp

decline in transactions bodes ill for further appreciation in
the Bitcoin price. Our graphic depicts Bitcoin appearing
elevated at the beginning of September vs. the 10-day
average of adjusted dollar-based transactions from
Coinmetrics. This gauge, one of our top price-outlook
indicators, has backed up to levels more consistent with the
Bitcoin price near $8,000.

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Bloomberg Crypto Outlook – September 2019 Edition

Meh Technical Indicators
With Good Support and Resistance Overhang, Bitcoin
May Turn Dull. The technical outlook for Bitcoin should
favor a tight trading band, not bulls or bears, in our view.
Volatility is set to keep declining as prices find layers of
support on dips and similar hangover resistance on rallies
from the previous parabolic bull market. Volatility and prices
should continue to converge with gold.
Don't Look to Bitcoin to Get Your Pulse Going. With
Bitcoin's initial transition from bear to bull market over, the
rest of 2019 should be marked by a continuation of declining
volatility. Our graphic depicts the downtrend in 180-day
volatility, which is set to resume its trajectory toward the all-
time low of 41% in 2015. If prices advance too rapidly,
volatility is more likely to increase and slow the
cryptocurrency's migration to a digital version of gold.
Set for Accelerating Decline in Volatility

Bitcoin Likely to Pass Support Test. Bitcoin is likely to pass

its first good test of price support since recovering earlier this
year. Our graphic depicts the crypto approaching its 20-
week average, which is near the May peak and about a one-
third correction from the 2019 high. The backup should be
sufficient to cleanse excessive speculative longs. Layers of
support starting near the mean of about $9,300, and the
$8,500 futures price gap, are building. But upside should be
limited on moves toward the year's high of about $14,000
due to layers of hangover resistance from 2017's parabolic
rally.

Bitcoin Trend Is Higher With Open Interest

Natural maturation, increasing vehicles for exposure and

more participants are additional volatility suppressors. The
180-day measure is used as a benchmark because its low in
October 2015 marked the birth of the bull market than ran
through 2017.

Gold Volatility Higher, Bitcoin Lower. Bitcoin and gold-

price volatility will continue to converge in support of their
companionship, in our view. The metal's 260-day volatility is
recovering from a two-decade low, and the same measure
for Bitcoin should keep sinking with maturation. About 7x vs.
gold, Bitcoin volatility peaked close to 10x last year. We
expect the difference to head toward 2x. Bitcoin's price, at
about 7x that for an ounce of gold, also looks high.

The ease with which Bitcoin rallied through its most widely Bitcoin Volatility About 7x Gold, Set to Decline
traded price range since the inception of futures -- about
$6,500 -- indicated a new bull market. Sustaining below that
mark would portend failure. Increasing open interest
indicates maturation.

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Bloomberg Crypto Outlook – September 2019 Edition

Gold is breaking out higher following five years of

consolidation vs. Bitcoin, which is set for an extended period Bitcoin Supported by Declining Yuan and Peso
of back-and-fill after some 10 years of appreciation.

Future - Bitcoin & Stability

The Bitcoin and Cryptocurrency Future: Digital Gold,

Stability. Bitcoin is winning the race to become a global,
digital store-of-value. In an increasingly digitized world, it's
logical to expect an independent, digital quasi-currency to
gain value amid rapidly declining interest rates and values of
traditional currencies. Most alt-coins are likely to be
increasingly subject to Bitcoin.

Bitcoin vs. All Other Alt Coins. Bitcoin's evolution into a

digital version of gold, underperforming alt-coin prices and
stability are trends we expect to endure. Primary takeaways
from our graphic are Bitcoin outperforming the Bloomberg
Galaxy Crypto Index, excessive supply of crypto assets and
the increasing market cap of Tether, the predominant stable
coin. A bull market in launching new stable coins indicates a
key flaw with most so-called cryptocurrencies: They are
highly speculative and volatile digital assets. Supply is high
and prices should continue to underperform first-born
Bitcoin.
Bitcoin Dominance Should Continue to Increase
Record highs in peso-denominated Bitcoin extol its virtues
vs. traditional and more difficult to transport gold.
Primary Test for Bitcoin: A Peak Dollar. Bitcoin is gaining
traction in the traditional space for gold as an independent
quasi-currency store-of-value. Our graphic depicts the
Argentine peso-denominated Bitcoin price at an all-time high
vs. the more subdued dollar-denominated version. If history
is a guide, the rapid appreciation of the trade-weighted
broad dollar will at some point reverse, and we expect
Bitcoin and gold to be the primary beneficiaries.
Bitcoin Record Highs in Argentine Peso

Love it or hate it, Tether is successful when measured on a

market-cap basis. Based on Coinmarketcap.com's rankings,
Dollar-denominated gold is showing divergent strength,
Tether is the No. 6 cryptocurrency at the onset of September,
indicating a potential strong greenback end-game. Since the
vs. about 16th at the end of 2017.
end of 2017, gold is up about 17% vs. 11% for the dollar to
Sept. 4. Bitcoin is down only 23%, despite the big 2017-18
Bitcoin on Its Way to Becoming Digital Gold. It's easy to
boom and bust.
find a case for a global digital store-of-value as currencies
plunge. The ability to diversify currency exposure,
particularly from capital constraints, favors a gold-like digital
quasi-currency, and Bitcoin is increasingly the choice.
Restrictions in China and recent capital controls in Argentina
add to the Bitcoin use-case. Our graphic depicts the sinking
values of the yuan and peso vs. appreciating dollar-
denominated gold and Bitcoin.

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Bloomberg Crypto Outlook – September 2019 Edition

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Bloomberg Crypto Outlook – September 2019 Edition

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