Earlier today we posted about Pantera Capital’s most recent disclosure of the size of its Bitcoin Master Fund. In addition to providing details of its fund, the hedge fund has also begun to issue public research reports about the bitcoin sector via their website and Twitter account.
Providing analysis on the previous month’s 39.2% increase in bitcoin prices, the letter offered three catalysts for the appreciation:
1)Absence of bad news
2)Positive enthusiasm and press coverage following the Bitcoin 2014 conference in Amsterdam and Circle’s successful launch
3)Attractive technical and fundamentals
Future is bright
Looking towards the future, Pantera believes that prices for bitcoin remain attractive on both a technical and fundamental basis, even after the recent appreciation.
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Among their bullish technical commentary
1)200 day moving average – Prices of bitcoin are currently undervalued when compared to their 200 day moving average price. According to research, since September 2012, 88% of the time, bitcoin prices have traded above their 200 day moving average. A reversion to their mean implies a price of $1205
2)Price cycles – Pantera’s most bullish commentary resided on their analysis price cycles associated with bitcoin. According to Pantera, currently, trading patterns of bitcoin are similar to the digital currencies move when it rallied between Dec 19th 2012 to the end of May 2014 (cycle A). Since August 2013, prices of bitcoin have followed a similar cycle in last 300 days to what they had traded in cycle A. If the current price cycle follows the moves of cycle A, it would lead to prices potentially trading more than 10 fold higher to $9500, before settling just below $500.
Among their bullish fundamental commentary
Rising adoption metrics –Pantera stated that “Bitcoin’s long-term success is tied to growth in adoption and, even more important, to development of applications and services which will encourage both merchants and consumers to want to use bitcoins.” This also ties into why bitcoin is a deflationary currency, as higher adoption leads to increases in prices.
Reporting adoption figures, Pantera listed that user adoption is exponentially leading to increased prices. They added that new services such as from Circle, BitPagos and Gliph are generating user interest which may lead to increased adoption rates.