Fundstrat “Misery Index” says now is the time to buy bitcoin
Bitcoin hurts so good, according to expert measurements based on the Misery Index for bitcoin.
"The time to buy is when there's blood in the streets" goes the saying, attributed to 18th century rich guy Baron Rothschild. It's been widely repeated since then, especially in the painfully volatile cryptocurrency space.
So-called contrarian indicators like these have been widely used, and in bitcoin it takes the form of a "Misery Index" that aims to objectively measure the amount of bitcoin blood in the streets to find the optimal time to buy.
The Misery Index is a scale of 0 to 100 that generally measures bitcoin's ongoing price performance and volatility. It was created by Fundstrat Global Advisors' head of research, Tom Lee.
According to Lee, a number below 27 is a good time to buy and a number above 67 is a good time to sell. Right now the index is in the 18-19 range, the lowest it's been since September 2011.
Bitcoin Misery Index
How accurate is it?
Historically it's been a very good measure, with numbers below 27 all indicating solid 12 month gains on the horizon. This has happened four times before, in September 2011, November 2012, January 2015 and September 2016.
Whether or not it's any good might depend on how you feel about bitcoin's future. It's worth noting that Lee is one of Wall Street's more prominent bitcoin bulls, predicting a rise to $20,000 by midyear.
In the short run, this measurement might indicate that the current bitcoin is anomalous, with this level of misery only occurring a few times before in the coin's history. History also suggests that it might reverse soon. Three of the four times the misery index has dropped below 27, bitcoin was back in the black a month later and posting monumental gains after 6 and 12 months.
On the other hand, the last time it was this low it took a full 12 months to realise a 20% price increase, with speculators gritting their teeth in the face of continued losses until then. It's possible that this is where bitcoin is headed in the short run. Many other experts might agree, with JP Morgan suggesting that bitcoin's due for a drop to about $5,000 but won't die entirely, and Credit Suisse suggesting that $6,000 is a natural price for bitcoin based on its price correlations with conventional markets.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, SALT, BTC, NANO