Jim Duffy comment: Does the Bitcoin rise signal the next cryptocurrency bull run?

While the recent focus has been on the established stock markets across the world, the lesser known cryptocurrency markets have bubbled away quietly. That is until now.

It seems that cryptocurrencies are waking from the bad dreams of a bear market, says Jim Duffy. Picture: Ian Howarth.
It seems that cryptocurrencies are waking from the bad dreams of a bear market, says Jim Duffy. Picture: Ian Howarth.

The major indices that we all know by their acronyms – the FTSE 100, S&P 500, Nasdaq – have all done pretty well in recent weeks. Even with Brexit causing uncertainty, these markets have tracked upwards giving seasoned investors a decent return. Yet it now seems that the cryptocurrencies are waking from a bear market, which for many has been a bad dream. Yes, Bitcoin is back and looks as sexy as ever.

Of course, if a stock broker, whether wearing a grey pinstripe suit or chatting with you online via a trading platform, ever tells you that a particular stock is “sexy”, you’d be a little worried. But, this is the cryptocurrency market we are talking about and recent history tells us that it can look hot one minute and freeze over the next. There does not appear to be any rationale behind the term “volatility” in this market. Coins or tokens can suddenly boom prompted by a large “whale” buy somewhere in the world. This is quickly followed up by thousands of computers sparking into life awakened by alarms alerting them to get in quick as something is happening. Ergo, the sudden boom ramps up. So, has this current rapid rise in the cryptocurrency called Bitcoin been a one-off or is it a sign that it has thrown off its winter coat and is ready to hit the beach?

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Bitcoin, as you may know, is a form of electronic cash. It is a decentralised digital currency without a central bank or single administrator. It can be sent digitally from one user to the other and traded on currency platforms such as Coinbase or Binance. Realised as an open source software in 2009, Bitcoin is often credited as the world’s first cryptocurrency, with many of the newer coins or tokens pegged to it. Essentially, this means that when Bitcoin moves up or down, so do they. Hence the stagnant, sedentary mood of the cryptocurrency markets in the last year.

In December 2017, Bitcoin shot to fame as it soared rapidly to hit an all time high of $19,783.06 (£15,000). Buyers were scooping up Bitcoin as if there was no tomorrow. Businesses were springing up across the globe offering the lay investor guidance and advice on how to buy, store and trade the coin. It almost felt like a gold rush with pan handlers jumping into the stream and unearthing little nuggets one after the other. Commentators like John McAfee of McAfee Software, predicted that Bitcoin, with its limited supply of coins, would be “at $500,000 be the end of 2020”.

Bitcoin ran out of steam, falling to $6,200 by February 2018. Indeed the whole market, which was reliant on its Bitcoin daddy to do well, tanked and has never recovered. Many people lost a lot of money. Some had borrowed from the bank, speculating that the Bitcoin trajectory was upwards and they would pay the mortgage off within two years as it hit new highs. Some borrowed on credit cards to get into the market and own some Bitcoin. Like all things built on fairytales, the party was over quicker than it began. But are we now at the start of another Bitcoin bull run?

Having languished around the $3,500 mark for five months, over the last week Bitcoin has broken $5,000 . The excitement is building, albeit with no guarantees, fundamentals or products to sell. Ostensibly, a feeling hyped up by some commentators and holders of the coin. One respected crypto commentator, who did predict the demise of Bitcoin after its 2017 rally, has stated that Bitcoin could now go on a “parabolic bull run to $72,000”. All seems a bit technical to me and lacking in substance. Nevertheless, interest is rising as Google searches for Bitcoin hit a six-month high.

Will 2019 see the start of a major bull run on Bitcoin? It is anyone’s guess. But, I have no doubt that there will be many ready with credit cards again hoping that this is the big one. Only time will tell.

- Jim Duffy MBE, Create Special