Don't Expect New Bitcoin Highs in 2018

Despite an already six month cool-off period, for 2018 we see more sideways and downside potential in the bitcoin price due to sluggish retail demand, hesitation from institutions and a current market cap that seems too high relative to the activity occurring on available blockchains.

Many investors and advisors are on record stating that $5,700 was the bottom in bitcoin for this year, and that higher prices lie ahead. While we are very bullish on bitcoin’s long-term prospects, we do heed caution for more short-term price optimism.

To find the starting point of the historic parabolic rally in bitcoin that ended at $20,000 we have to go as far back as August 2015, when bitcoin traded at below $200. This past rally was a stupendous, historic move. Even in secular bull markets, the collective of economic actors need time to absorb the information embedded in its characteristic high volume rallies.

As I’ve indicated in my 2018 outlook, I think chances are high for this year to be remembered as a shakeout year: a lemon market in altcoins, regulators catching up and infrastructure growing pains.

Next, trading volumes are not dead, but still below those seen during last winter and spring.

It’s unclear how much of the recent pick-up in volumes are the result of a short squeeze and how much is coming from new long-term buyers coming in.

We think the market likely needs more time to absorb the recent 30-month rally, which could produce lower prices.

We don’t foresee new all-time highs in bitcoin for 2018, and unless data starts suggesting differently, we are expecting mostly sideways or lower price action.