Bitcoin is poised to resume its bullish trend in the second half of 2021, according to the latest detailed report by Bloomberg Intelligence.
The dossier claims that, with crude oil set to commence a heavy bear trend, profound macroeconomic implications would steer investment into cryptocurrency at a rate not seen since Bitcoin smashed through $60,000 earlier this year.
According to the report, the benchmark digital asset represents rapidly advancing technology against the related deflationary forces, as evidenced by the commodity yardstick, which may have peaked near the halfway point of its downtrend since 2008.
Bitcoin’s rising adoption and falling supply represents a polar opposite of the situation crude oil finds itself in, engulfed by a world of increasing digitalisation and decarbonisation which are solid underpinnings for the price of the cryptocurrency to continue advancing against the commodity.
The relative discount in the price of Bitcoin against the premium in crude oil may show that technicals and fundamentals are aligned for resuming the upward trajectory it has previously enjoyed in the ratio.
With the current exchange standing at around 470 barrels of crude to one Bitcoin, support around 410 is strengthening. Bloomberg Intelligence points to similar conditions at the end of 2016 when the Bitcoin-to-crude ratio fell to a three-year low before steadily rising throughout 2017 and into H1 2018. With the ratio poised to resume its uptrend, BI believes that this could be replicated into 2022 if a new low in relative Bitcoin volatility at the end of 2020 is a guide.
Trends favour Bitcoin
“Pre-existing trends certainly favour Bitcoin over crude oil as we look to H2 2021,” said Mike McGlone, Commodity Strategist at Bloomberg Intelligence (BI).
“If West Texas Intermediate crude oil reverts from seven-year highs reached at the start of July, the pre-existing downtrend in bond yields is more likely to accelerate, with bullish implications for store-of-value assets gold and Bitcoin. ‘Pre-existing’ needs to be clarified, as probabilities appear tilted toward crude oil resuming its downward trajectory since peaking in 2008.
“Falling US Treasury bond yields may have not ended the trend of about 40 years.”
When prices get stretched against more enduring fundamental trends, it typically takes only a slight catalyst to trigger some reversion, which is how BI views current conditions in elevated crude oil prices versus discounted Bitcoin ones.
The original cryptocurrency was valued at just below $33,000 this morning, which is around 50% of its peak on the back of a range of challenges, including energy-consumption issues, China pushback and delayed US ETFs, which Bi expects to be transitory only.
Juxtaposed with this is WTI crude oil, which has recovered to the most extended above its 100-week moving average since the 2008 peak on optimism for a recovery in demand and for OPEC to keep supply off the market.