Bitcoin may be poised to move higher, but it won’t be a meteoric rise, and any increase will be well below the cryptocurrency’s all-time high. The world’s leading crypto by market cap has rebounded and traded in a narrow range after falling as much as 50% from its record high last month.
However, Bitcoin mining activity suggests a move above $40,000 is possible.
“Several on-chain and network indicators have reflected a bullish skew over the week, albeit most being relatively neutral for the short and medium-term,” Lennard Neo, a certified financial analyst and head of research at Stack Funds in Singapore, said in a research report.
Adam Smith’s invisible hand—a metaphor describing incentives to buy and sell—are at work in the market.
When Bitcoin’s price is high, Bitcoin miners have incentive to sell and pocket a quick profit. This can lead to an overall downturn in the market as supply increases.
But with prices well below the recent high, or even the retrenchment from the peak, Bitcoin miners tend to sit on their new coins. This can lead to higher prices if demand is strong.
Bitcoin miners use high-powered computers to solve complex hexadecimal puzzles to earn new coins. The process is needed to refresh the blockchain, the unalterable record of Bitcoin transactions.
Neo cited the Puell Multiple, a metric developed by Bitcoin analyst David Puell, as evidence suggesting a price gain. The ratio divides the daily value of Bitcoin issuance by its one-year moving average, or more simply, mining revenue over its one-year average.
“A high Puell multiple suggests high profitability for miners, which have led to subsequent sell-offs,” Neo said. “Similarly, when the ratio is low, miners’ propensity to sell decreases, leading to a supply crunch and eventually a price increase.”
The metric is now at about 1.40, a level where miners have less incentive to sell. The ratio had been above 2.50 earlier this year and peaked at about 3.53.
The elevated ratios may have had a hand in the Bitcoin market trading sideways— within a narrow range—prior to the downdraft.
“This signifies potential buying opportunities should the multiple decline to below 1.0,” Neo said. “Having said that, we prefer to be cautiously optimistic as further downside could surface, which in turn generates better value for anyone looking for entry points.”
“Entry points” translates from cryptospeak to “a good price to buy” Bitcoin for gutsy investors.
Bitcoin’s Fear and Greed Index registered “extreme fear” on Thursday. A month ago, it registered “extreme greed.” “Extreme fear” may indicate that investors are overly concerned about future price movement.
This could mark a buying opportunity for long-term investors willing to accept wild short-term price swings. “Extreme greed” may indicate a frothy market due for a price correction.
The index reviews volatility, market volume, social media, trends and Google searches for “Bitcoin” to assess the current state of the market. It’s a gauge of market sentiment—not an algorithm intended to forecast future pricing.
In broad terms, the Fear & Greed Index accurately sized up the crypto market prior to and during the recent downturn. Depending on your point of view, Bitcoin faces severe challenges or those challenges will strengthen the market.
Skeptics note that the recent downturn underscores Bitcoin’s volatility and guts the argument that it’s a good store of value. That undercuts the belief that it’s a good inflation hedge.
Critics question Bitcoin’s long-term relevance as governments worldwide impose tougher regulations and crack down on tax avoidance. The counter argument is that such action will drive out bad players and strengthen the Bitcoin market.
But there could be a long-term threat ahead.
China is experimenting with a digital yuan, a move that could challenge the dollar’s worldwide dominance. The Federal Reserve Bank of Boston is working with researchers at the Massachusetts Institute of Technology to develop a digital dollar.
If successful, the digital currencies would be issued by governments, regulated and backed by assets while providing the ease-of-use and security pioneered by cryptocurrencies. If so, who needs cryptos?
The digital currencies would preserve the government monopoly on issuing currency, a power some analysts say Washington and Beijing—or any government —will fight to protect. In short, governments worldwide may build on innovation fostered by cryptocurrencies while gradually strangling them.
Nevertheless, there is a market for Bitcoin and its price now responds to market forces.
In mid-day trading Thursday, Bitcoin changed hands at $38,485.03, up 1.26% in the last 24 hours and up 32.67% for the year. The 24-hour range is $37,209.20 to $39,473.20 The all-time high is $64,829.14. The current market cap is $720.62 billion, CoinDesk reported.
The COVID-19 pandemic pounded brick-and-mortar retailers, leading thousands of independently owned stores to close and forcing some major chains to file for bankruptcy protection.
But prescription eyewear retailer Warby Parker plans to open as many as 35 new stores this year and there’s talk of an IPO after the New York-based company secured another round of venture capital financing.
The decision to expand underscores the strength and resiliency of the U.S. economy, especially after many big-name retailers closed during the nationwide lockdown intended to curb the spread of the coronavirus.
Major retailers filing for bankruptcy protection during the pandemic include Brooks Brothers, Century 21, GNC, J. Crew, JCPenney, Lord & Taylor, Neiman Marcus, Tailored Brands (Men’s Wearhouse, Jos. A. Bank) and Ascena Retail (Lane Bryant, Ann Taylor).
Some companies will reorganize and reopen while others will vanish.
The Federal Reserve, the nation’s central bank, said the number of small businesses closing each year ranges from 7.5% to 8.5% of the total. But during the COVID-19 pandemic, the exit rate jumped as much as 25% to 33% above the normal attrition rate.
The estimate is based, in part, on “some prudent guesswork” and better figures won’t be available until later this year or even 2022, Fed researchers said in a report.
While difficult for small owners and the community, business closures are part of the business cycle and strengthen the market by shaking out the laggards and fostering efficiency among the survivors.
But COVID-19 may have changed the pattern.
The Fed dryly noted, “The pandemic-induced recession raises concerns about whether exit can be as productivity enhancing as it has been in the past.”
The carnage underscores the savvy and success of Warby Parker.
David Gilboa and Neil Blumenthal founded the company in 2010 while students at the University of Pennsylvania’s Wharton School. Unlike Bill Gates, who dropped out of Harvard and went all in to launch Microsoft, Gilboa and Blumenthal stayed in school. They now serve as the company’s co-CEO.
Remaining students allowed the founders to move deliberately on each detail and to test the company’s name. It’s apparently intended to convey a mix of sophistication, stability and sass.
The name is also catchy – who or what is “Warby”?
Turns out it’s probably a surname of Old French origin and an occupational moniker for a forester. It appears to have arrived in England after the Norman Conquest of 1066. Combining Warby and Parker is astute marketing.
Warby Parker sells glasses and contact lenses online and at its stores in the U.S. and Canada. Online customers receive several try-on frames prior to buying, a deft tactic.
Like other retailers, the company took a hit during the pandemic lockdown and closed about 135 stores. But it has received solid venture capital backing, including Tiger Global Management, Forerunner Ventures, Spark Capital and Menlo Ventures, Pitchbook data shows, and now plans to expand as the economy rebounds.
Warby Parker is privately held and therefore doesn’t disclose financial data, but according to press reports the company is valued at about $3 billion and has been profitable since 2019.
The sector is highly competitive with low barriers to entry. After all, the company sells prescription eyewear and isn’t developing the next wonder drug or building spacecraft to send astronauts to Mars.
There are scads of competitors slicing the market every which way, including Lingo, Archibald, Fetch, Loch Eyewear, Ace & Tate and EyeBuyDirect. The business model has been adapted to other sectors, including direct-to-consumer companies such as shoemaker Allbirds, mattress-retailer Casper Sleep and makeup seller Glossier.
Some former Warby Parker employees left to found Away, an upscale luggage retailer.
So far, Warby Parker appears to have done just about everything right as evidenced by the company’s strong early-stage funding and expansion plans.
And who knows, if the company goes public and if it lists on the New York Stock Exchange, maybe Mr. (or Ms.) Warby will venture out of the woods to ring the opening bell on the first day of trading.