Updated 7 May, 18:00 GMT
This is what DataTrek Research’s Nick Colas – the first Wall Street analyst to cover bitcoin, starting back in 2013 – has to say about the recent bitcoin rally, which is still pushing to $10,000 but Sunday has been hit by profit-taking. Basically he’s telling clients to hold off jumping in just yet.
“Is now the right time to buy?
“No, for two fundamental reasons.
“The first is we are not seeing a lot of incremental engagement with people buying bitcoin for the first time. And like any new technologies you need new adopters to come in to make it more valuable and in terms of Google searches they are way down compared to the peaks of December and January – 85 to 90%.
“The second issue is we are not seeing a lot of wallet growth – people are not opening up a lot of new bitcoin wallets to purchase the asset. Growth in wallets was only 2% last month [April]; it was 5 to 7% per month all of last year.
“So we are not seeing the kind of growth to show that bitcoin really has a solid track higher here fundamentally.”
The pullback in the bitcoin price today underlined the tough resistance formed at its 200-day moving average around the 10k level.
Buffett’s slamming yesterday of crypto as “rat poison squared” may have contributed to the dampening of sentiment over the past 24 hours. Colas’s interview with CNBC was cons cited on Friday.
But maybe it’s actually the best time to buy. Read on.
The trouble with the Google search part of the argument is you have to work out whether it is a leading indicator or a lagging one. That’s to say, by the time the searches jump the price will already have jumped too, given that rising price leads to rising searches as news flow attracts a interest.
On that view, the best time to buy may be when the price has risen but the searches haven’t, suggesting an investor could be getting in ahead of the crowd
Bitcoin is down 2.7% at $9,584, according to coinmarketcap, with Bitcoin Cash the only major altcoin in positive territory today, trading at $1,723, 5% higher at time of writing.
Bill Gates, who is a longtime skeptic on cryptocurrency matters, also weighed in on bitcoin, and not in a good way – it’s the Ponzi scheme thesis.
“As an asset class, you’re not producing anything and so you shouldn’t expect it to go up. It’s kind of a pure ‘greater fool theory’ type of investment,” Gates said. “I would short it if there was an easy way to do it
Gary has been writing about cryptocurrencies since 2013 and currently works as the cryptocurrency analyst at interactive investor, the UK’s second-largest online investment platform. Gary contributes for Coin Intelligence News in a personal capacity and none of his commentary should be considered investment advice. Gary is the winner of the ADVFN International Financial Awards 2018 Cryptocurrency Writer of the Year. Contact Gary on twitter at: @gary_mcfarlane