Pantera Capital crypto hedge fund says bitcoin has hit 2018 bottom

Posted: 13 April 2018 1:06 pm
Bitcoin Strong - FI

Analysts point at bitcoin's breach of the 200-day moving average, a sign that it's time to go long.

Cryptocurrency fund Pantera Capital says bitcoin has bottomed out and is set to rise on an influx of institutional money.

"For those who are new to Pantera who might think a fund manager like Pantera would always be saying 'Today’s a great day to get long,' I rarely have such strong conviction on timing. A wall of institutional money will drive the markets much higher." wrote Pantera's Dan Morehead and Joey Krug in a letter to investors.

According to the note, this is one of just three buy and one sell recommendations it has made in three years.

The fund entered existence bullish on the future of cryptocurrencies, and has previously argued that the potential for asymmetric returns make bitcoin a decent addition to a reasonably diversified cryptocurrency folio. It has also been in talks with institutional investors for a while, and so might be better placed than most to anticipate a wall of institutional money.

However, it's not clear how much of that money will necessarily be finding its way to bitcoin, and then staying there.

Pantera's prediction is based on bitcoin's broaching of the 200-day moving average and one of the biggest single day spikes in bitcoin prices since the December 2017 bull run.

"Traders often use that time period as it seems to be the optimal response time of human psychology," the letter said. "Long enough to stop fretting about missing the trade. Not too long that the information is lost."

However, that particular technical analysis might be a little superficial, and discounts some of the more suspicious elements of timing in this rise. The astonishing rise happened almost instantly and represented bitcoin's largest ever one-hour trading volume. It also happened the day after open bitcoin short positions reached their own all-time-high.

But even if this rise was driven by deliberate price manipulation, that doesn't mean Pantera is wrong or that technical indicators aren't useful.

Pure technical indicators are often thought to be a good way of taking on bitcoin, because they are essentially just a measure of greed and fear in the marketplace, and have nothing to do with a product's fundamental worth. With bitcoin's underlying fundamentals remaining exactly the same throughout its rises and falls, it's clear that bitcoin price movements are based entirely on hype and gut feelings, which are exactly what these technical indicators measure.

That's not necessarily a bad sign for bitcoin either. Precious metals, gemstones, vintage cars, comic books, baseball cards, artworks and much more are all some of the world's most useless and overpriced items. They're also known for being excellent and quickly-appreciating stores of value, and can sometimes be exceptionally good investments. Bitcoin has all the advantages of these items, along with lower maintenance costs, transparent supply, much better liquidity and some actual real world applications.

There are no guarantees, but Pantera's telling its investors of today's sharp rise has brought enough fear and greed for bitcoin to rise again.

Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, NANO

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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