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Bitcoin: An Emergent Long-Term Store of Value

A significant number of cryptocurrency investors view Bitcoin as both a long-term store of value as well as a digital currency – a view supported when taking long-term charts and patterns into consideration. While short- and medium-term volatility have become hallmarks of Bitcoin and other cryptocurrencies, investment managers can utilize cryptocurrencies to deliver non-correlated asset exposure to their clients’ portfolios.

One pattern of note to many investors is the so-called “golden cross.” A golden cross is a bullish candlestick indicator marked by a relatively short-term moving average crossing above a long-term moving average. Longer term patterns typically carry more weight, and thus a golden cross can indicate an emergent bull market which is reinforced by high trading volumes. Bitcoin, like other investable assets, is no stranger to trading pattern indicators which could present a golden cross scenario. In fact, Bitcoin has seen this scenario on more than one occasion. 

In July 2019, Bitcoin reported its first golden cross since February 2016, which was six months before its last halving. The 2016 golden cross led to a Bitcoin bull-run and an all-time high of $20,083 in December 2017. Just recently in December 2019, another golden cross was reported on the weekly average price chart – signaling a potential upcoming bull run for Bitcoin. Taken into account along with, Bitcoin’s anticipated halving in May 2020, many cryptocurrency investors are hopeful for an exponential rise in price for Bitcoin this year.

With long term charts looking bullish, Tim Draper of venture capital firm Draper Associates predicts in a Forbes article that, “We’re two years away from everyone using Bitcoin.” As international currencies like Argentina, China, and the U.S. have recently lost value due to international tensions and internal corruption, this prediction does not seem too far off.

Beyond individual technical trade patterns, a second way to view Bitcoin as a long-term store of value is in comparing its growth chart to other established stores of value. Gold is a commonly referenced comparison. When long term indicators are taken into account, gold experienced its own share of early volatility before maturing to deliver price stability followed by acceptance and trust as a store of value asset.

Matt Hougan, a cryptocurrency and blockchain writer for Forbes, argues that any store of value rapidly appreciates initially and slows over time, including gold (source article). Looking at these longer-term patterns, high volatility at the onset is a consistent characteristic of new currencies – with mature stabilization occurring over time. When looking at it from this macro point of view, Bitcoin is still in its infancy. Slowly but surely, Bitcoin seems well on its way to becoming digital gold, not just as a currency, but also a true long-term store of value.

Disclosures: Not investment advice. It should be assumed that Sarson Funds or its affiliated managers hold positions in all projects that are discussed. It is not possible to invest in any project directly through Sarson Funds, Inc. or its affiliated managers. Any investment product offered by managers affiliated with Sarson Funds should be assumed to be only available to Accredited Investors and subject to the individual terms and conditions of that offering including but not limited to those eligibility requirements associated with U.S. Securities Regulation D, section 506c. Talk with your financial advisor before making any investment decisions or have them contact Sarson Funds directly at info@sarsonfunds.com

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