The recent streak of healthy, stable gains in the bitcoin price has brought back many bulls into the open. Pantera Capital, historically bullish on bitcoin prices, has joined them, recently issuing a report arguing that bitcoin has significant upside potential.
Dan Morehead, Pantera’s CEO, points to the precarious state of financial markets six years ago. “You all remember it. On March 9, 2009, the S&P 500 fell below 700 for the first time in 13 years,” he writes. “Goldman Sachs published a research report warning that it could fall as low as 400, and mattresses all over America reclaimed the role of safe haven. But today, anyone who pulled out their cash in a panic is kicking themselves. That day the U.S. equities markets closed at a new low.”
Since then, the S&P has risen 210%. The NASDAQ, from its 2002 low following the dot-com boom and bust, has returned 350%.
So too, bitcoin, which plunged by 46% to start the year on a low near $162 on January 15. Media were writing its obituary, contrasting it with the mighty US dollar and the prospect of the Fed raising interest rates. Morehead argues that as is often the case in capital markets, an asset’s going price is not reflective of its underlying value:
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“Price is kind of like a score board for the fans. However, the only accurate picture of Bitcoin’s success or failure is its fundamental metrics.”
Pantera looks to capture these fundamental metrics through its BitIndex, which tracks developer interest, user adoption and merchant adoption—which Pantera believes are “are the three most important leading indicators of Bitcoin’s medium-term success.”
Morehead (perhaps wisely) stops short of making any specific predictions for bitcoin’s price. Furthermore, he points out that timing the market is nearly impossible. Rather, “Bitcoin is a much better buy now than in November 2013”, he argues, based on BitIndex metrics. Regulators have made much more progress on the matter and taking greater notice of digital currency. Record amounts of venture funding are pouring in—a total of only $52 million had been invested as of November 2013, but $576 million has been added since then.
From a technical perspective, Pantera sees the recent price drop as positioning bitcoin “at the bottom end of its historic deviation from trend.”