The experts see the recent pullback from the all-time highs near $20,000 as pointing to the fact that this is an asset which is still trying to find its real value. Other strategists indicate the price of bitcoin to be a bubble that has already burst and now on its way down to zero.
Demand Driven by FOMO
Expert strategists at Barclays say that a fear of missing out explicitly drove the December demand. Many investors went in because they were afraid of missing a great investment opportunity and this was probably one of the leading causes of the short-term price increase.
According to the Bank’s strategists, this was one of the main reasons pushing the value of bitcoin up, and now the race to buy the digital asset seems to have cooled down considerably. Barclay’s expressed its opinions in research presented on April 3, 2018.
“Combined with the results of our theoretical modeling, survey findings suggest that, unlike the peaks in Bitcoin prices in 2011 and 2013, the most recent peak may have been the ultimate top and that speculative interest could decrease from here.”
This pause in speculative interest is leaving bitcoin holders oversupplied, overriding the supply-demand factor and thus dictating the bearish market sentiment.
According to the chart below, the demand until 2015 (light blue) pushed the prices up. This action was followed by a supply (dark blue) selloff. The chart also shows that both variables have moved in tandem since 2015, which suggests that the supply side is forcing the speculative behavior.
Following the report, Barclays states:
“Past peaks in [bitcoin] in 2011, early 2013 and late 2013 were followed by collapses in price of 93 [percent], 70 [percent] and 86 [percent], respectively, before recovering and advancing to new highs. But in each of those cases, awareness was relatively low and the potential for new entrants consequently was high. As a result, we believe the speculative froth phase of cryptocurrency investment — and perhaps peak prices — may have passed.”
The bank estimates that the top value for all cryptocurrencies could be between $660 billion to $780 billion. According to Coinmarketcap, before the industry downturn in early January 2018, the total value of hundreds of digital assets hit a peak value of around $830 billion.
Bye-Bye All-Time Highs
Barclays also believes that the increasing popularity of digital assets, such as bitcoin or ether may have been the cause for the reduction on the speculative buying.
The bank also estimates that the overall awareness of bitcoin in the US is 60 percent, 88 percent in Japan, 90 percent in South Korea, and 64 percent in Canada. As such, the chances for speculative buying is decreasing along with the likelihood of a push to previous all-time highs.