Bitcoin Price Forecast 2020:
- Despite falling roughly $6,000 from its June peak, Bitcoin was one of the best performing assets in 2019
- Nearly devoid of bullish sentiment in the second half of the year, BTC/USD will round out 2019 with a yearly return of about 90%
- With that in mind, it may be worth holding some of the cryptocurrency in 2020 in the event bullish sentiment returns, although the nearer-term outlook remains in question
Bitcoin Price Forecast 2020: BTC/USD Lacks Bullish Sentiment, For Now
Bitcoin was one of the best performing assets in 2019, enjoying an incredible rally in the first half of the year which saw it rocket past assets classes like equities, traditional currencies and commodities. On pace for a 90% return in 2019, Bitcoin once again displayed its uncanny ability – an ability which has drawn criticism from some – to undergo wild price swings. Consequently, Bitcoin may deserve a spot in your investment portfolio in 2020 as a sort of “x-factor” investment given it fits within your risk tolerance and broader strategy.
Bitcoin Price Chart: Daily Time Frame (January 2019 – December 2019) (Chart 1)
To be sure, the shorter-term outlook for Bitcoin remains unencouraging. Slipping more than $6,000 – or about 170% - since its June peak, BTC/USD has fallen beneath a series of trendlines and support levels that have left its current valuation difficult to defend. Clinging to support around the $7,000-mark, Bitcoin bulls and optimists have offered a series of rescue efforts that have kept price afloat, but bearishness persists, and fundamental drivers appear few and far between.
Previously enjoying a boost from currency-crises and economic uncertainty in emerging markets, many issues in at-risk economies have receded which has seen Bitcoin’s negative correlation with emerging market currencies weaken and left the digital asset without a main fundamental driver. Further still, cryptocurrency volume has fallen broadly as the asset-class falls out of the spotlight in more developed markets. Consequently, a broader downtrend has emerged and undermined the gains established on the back of currency woes in South Africa, China, Argentina, Turkey and other emerging economies.
Bitcoin Trading Volume Shrinks
Created with TradingView
With that in mind, Bitcoin may continue to falter in 2020 especially given the weakened state of technicals at the coin’s disposal. Still, the price history of Bitcoin and the nature of the asset make it an intriguing option for portfolio allocation in the new year. While offering the potential for outsized gains of 2 or 3-fold, Bitcoin could also arguably serve as a hedge against investments in emerging markets currencies or equities if a crisis emerges.
Source: Bloomberg
Still, the unpredictability and volatility of Bitcoin make it an undoubtedly risky investment and there is potential for the current downtrend to persist indefinitely as cryptocurrencies find their role in the investment world. Therefore, any allocation should be kept to a minimum in my opinion, but enough to grant exposure to the explosiveness of the asset class. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis on shorter-term price movements in the largest cryptocurrency by market capitalization.
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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