by Dr. Adam Weigold
Just over a month ago I wrote an article (see Smart Hedge against ETH and BTC) about how investing in an ICO is the only sensible hedge against the recent falls in Ethereum (ETH) and Bitcoin (BTC) prices. If you followed my advice you would have avoided further losses of over 50% in Ethereum and 35% in Bitcoin. In other words, in my humble opinion, I was proven right. Investors in ICOs are now breathing a sigh of relief and faithful holders of ETH and BTC are more nervous or depressed than ever.
Congratulations to all new ICO investors who are now thinking they are very wise. Your timing has been impeccable and your savings will continue to accrue as the slump continues for a little while to come. And my sincerest condolences to all those who have been too scared to follow the contrarian course, and are now praying for a rebound in crypto-currency pricing. Your investment strategy might be seriously flawed but your faith in your favourite crypto-currency is without question.
After a month of panic in the crypto-community I would now like to reiterate the same advice from last month. It still holds true. If you hold ETH or BTC then you should divest into new ICO's asap and avoid all other currently listed crypto-currencies. Its not too late to avoid further losses. The new ICO is simply the best hedge against further drops in crypto-currency prices.
Why? Because a new ICO investment puts a price hold on your crypto assets for the duration of the ICO which usually last 2-4 months. Hopefully this price hold will outlast the current market decline until market positivity (or at least stability) returns. And if you have invested in the pre-sale you will usually make a 20-30% profit upon listing. As soon as your ICO is listed you can exchange back into ETH or BTC .... but you might not want to.
From examining bitcoin history, I anticipate the same drop in price to happen to both ETH and BTC over the next 2-3 months as happened over the last month. That means by June this year I predict an ETH price of $200-$300 and a BTC price of $6000-$7000. Then they will slowly increase to double their price by 2020 ... no sooner. The hype has been exhausted in BTC (and the utility found lacking), and ETH is two years away from its second big surge. Ethereum simply needs time to realize its practical utility that the market has already priced in. In other words, it needs more customers than investors.
In my view, if you want to hold on to ETH or BTC hoping for a quick rebound .... do so with both hands clasped and pray to your god. However we have seen all this before. So you should take note of history .... not deities.
If we look back at Bitcoins history it had its first real bull market at the end of 2014 (see image 2 right). This run was 5 years after an inconspicuous launch and then it floated between $1 and $10 for many years. But as soon as it found some practical utillity and market acceptance it suddenly boomed to a record high around $1200 in November 2014. But by January 2015 it had dropped to less than half of that peak. By March 2015 it had bottomed out to $200 and the boom was over. Or so everyone thought. Now we know that after 2 years in the wilderness Bitcoin boomed yet again in late 2017 and hit the stratospheric altitudes of $20k that made a lot of people rich.
The timing and pattern of the first BTC and ETH booms are obviously similar and perhaps ominous (from comparing Images 2 and 3). Consequently it is my view that ETH is now going through what Bitcoin went through in early 2015. It is all part of the cycle of technology evolution, customer adoption and market maturity that each serious crypto-currency must endure to survive. The ICO metrics are being set and a formula is now emerging. It is not coincidence that both currencies peaked in late November and then fell hard at the end of January (when most tax returns are due). And it is not coincidence that they peaked at around the same price of $1200. Logic now dictates that they will also bottom out at a similar price too (ie: $200-$300).
If you look at Image 4 then you will see the best predictable future for ETH. It will likely follow bitcoin, albeit on a slightly more impetuous timescale. The first small peak in Image 4 is actually the major peak in Image 2. That should give you all long term confidence. Bitcoin peaked at $1200, then slumped to $200, then took another 2 years to get back up to $20,000. Now it has dropped to $7800 and people are saying it is undervalued. My opinion, given its lack of real utility, is that Bitcoin is still overvalued and Ethereum will be a bigger market player in 2-3 years. ETH is at the first stage of market evolution while BTC is at its second.
From a personal point of view, I am betting on new high quality ICOs and then perhaps convert it back to ETH in 6 - 12 months. Everyone has their own investing strategy and good luck with yours. As an investor in Bitcoin since 2012 I prefer to follow the long term data trends .... and what has worked for me in the past.
Good luck in all your crypto-investments !