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Tom Lee Updates Bitcoin Misery Index, At Highest Level in Bear Market

Bitcoin Misery Index BTC Tom Lee

Popular cryptocurrency pundit and Fundstrat Global Advisors analyst Tom Lee issued an update on his “Bitcoin Misery Index” in an interview with CoinTelegraph published on April 19. According to the analyst, Bitcoin is reaching new heights by the BMI indicators, establishing new markers that have yet to occur in a bear market.

While analytics firms differ in the market indicators they follow, Fundstrat uses the cleverly titled Bitcoin MIsery index as a way of gauging investor sentiment for the leading cryptocurrency by market capitalization. Lee designed the BMI as a way to inform investors on the relative misery of Bitcoin holders based on values such as coin price and volatility.

On April 2nd, the currency hit a BMI of 89 out of a maximum score of 100 (with the upper limit being associated with positive sentiments and 0 being outright misery). According to Lee, Bitcoin did not once break the 50 during all of 2018, despite the coin entering an extended bear market. In fact, Lee reports that Bitcoin has never achieved a BMI of greater than 67 in the midst of a bear market, giving some indication into the current state of cryptocurrency prices, leading Lee to conclude,

“It means that a bull market is likely starting.”

Lee had previously reported that the Bitcoin’s massive leap in BMI was giving mixed signals, saying

“Good–> Since 2011, BMI >67 only seen during $BTC bull markets. More evidence bull starting. Bad –> BMI >67 after peak, $BTC falls ~25% = Profit taking ST.”

However, he cautioned in the interview that elevated BMI values have traditionally correlated with a market drawback. Values above 67 have been an indicator to sell BTC, despite the positive sentiment for Bitcoin and its future outlook, as such elevations tend to be short lived. Values below 27 have been associated with buy signals, and give some indication that the currency is bottoming out and ready to swing in the other direction.

The index has not been full proof in predicting short term market movements, but has done fairly well in indicating longer trends. The last time BTC logged a score of 67 on the BMI scale was August 14, 2017. Selling at that time would have caused investors to miss out on Bitcoin’s epic bull run which took the currency to nearly $20,000, but did fall within several months of the coin turning bearish after positive price movement throughout 2017.

However, BTC’s last relative low in BMI was November 27, 2018, generating a score of 24. Following the buy signal at the time would have led investors to catch the relative bottom for Bitcoin as the currency traded near $3000–which would have result in over 80 percent profits at current price levels.

According to Lee, BTC trading at such a high level (>67) has led to a downturn in market prices “six out of six times,” with the average drop in price around 25 percent. Lee also pointed out that price retractions for Bitcoin following elevated BMI could be investors moving their profit into altcoins, as the market cycle for cryptocurrency has historically followed bullish runs for BTC followed by an elevation in alts.

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Tom Lee Claims Market is Wrong, Calls for Bitcoin to be Valued at $14,800

Bitcoin (BTC), Cryptocurrency–While some are calling for the final demise of Bitcoin, with the currency exhibiting price movement that would indicate the bubble has popped, long-time cryptocurrency bull Tom Lee claims that an irrational market is to blame for the falling price of BTC.

Compared to previous predictions, which have the currency falling to $2500 with little support to turn around the losses of November, head of research at Fundstrat Global Advisors Tom Lee finds the value of Bitcoin significantly lower than what it should be. In a note to investors published on Thursday, the advisor gave some surprising and hopeful news for those who left confused over the precipitous drop in BTC pricing throughout November–a month which culminated in the worst losses for Bitcoin since August 2011.

Lee, who has been a long time cryptocurrency advocate and Bitcoin bull, claims that the fair value for the number one cryptocurrency by market capitalization should be between $13,800 and $14,800. As apart of his analysis, he cites the large number of active wallet addresses, how often BTC is used by accounts and the deflationary supply of the currency all pointing to a much higher valuation than the current price of $3400.

While some continue to chide Lee for his predictions, particularly following his oft-remarked, bullish claim in May that Bitcoin would climb to $25,000 by the end of 2018–putting the price of the currency above its most recent all time high–he remains confident in the outlook for the industry and his own valuation. As opposed to a flaw in his analysis for the worth of Bitcoin, Lee blames an irrational market for creating the current state of cryptocurrency valuation, with other indicators such as adoption pointing to a higher value,

“Fair value is significantly higher than the current price of Bitcoin,” he wrote. “In fact, working backwards, to solve for the current price of Bitcoin, this implies crypto wallets should fall to 17 million from 50 million currently.”

Lee cites a similar argument made by analysts and supporters of cryptocurrency, that while market prices are falling the adoption and influence of the industry is expanding. Mike Novogratz, another Bitcoin bull and CEO of Galaxy Digital Holdings which is heavily invested in cryptocurrency, described a similar sentiment in a conference call to investors reported on by EWN at the beginning of the month. While Novogratz remarked that it had been a horrible year for token prices, including losses for Galaxy Digital which have exceeded $130 million in 2018, he stuck by a strong outlook for the industry in 2019 and beyond,

“I fundamentally think you’re going to see big adaption in 2019, 2020. Lots of the items in the digital world, the e-gaming space, are low value items so I think people will be more comfortable participating in blockchain. We’re making big investments in that area.”

With the potential for Bitcoin growth and cryptocurrency adoption still climbing in spite of falling prices, both Lee and Novogratz are hinting at a market turn that could happen unexpectedly. Similar to the crash in internet stocks that occurred prior to wide-scale dissemination for both Wall Street and Main Street, cryptocurrency could be in the latency phase as investors and users wait for improved development.

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