Bitcoin Price: Saxo Bank Doesn’t Rule Out A ‘Crypto Comeback’

Bitcoin climbed to within striking distance of $20,000 in late 2017 before collapsing during the opening three months of 2018, losing more than half its value. The first quarter marked the asset's worst opening quarter on record and the second-worst quarter in its history. Jacob Pouncey, cryptocurrency analyst at Saxo Bank, attributes the weakness to tightened regulatory oversight and social media bans on cryptocurrency advertising. The situation looks fragile, Pouncey said, but he won't rule out a comeback.

Pouncey expects prices to slide further in the near term. Regulators are tightening oversight, and the Mt. Gox trustee has begun selling large quantities of bitcoin. Companies are consolidating the sector. Monex Group acquired Coincheck. Yahoo took a 40 percent stake in BitARG Exchange Tokyo. Goldman Sachs-backed Circle bought Poloniex.

Market turmoil could spark a rally. A sharp correction in stocks would push investors toward assets uncorrelated with equities. "If there is a significant pullback in the equity markets, there will be an inflow of money into uncorrelated assets, or assets that lie outside the reach of the traditional financial system in which cryptocurrencies are a potential alternative," Pouncey said. Better regulation and investor protections might draw institutional money into crypto. "The inflow of institutional capital to the cryptocurrency market due to the increase in regulation and investor protection could lead cryptocurrencies to a positive quarter," Pouncey added.

Cryptocurrencies have surged during bouts of geopolitical tension like Brexit, Trump's election, and North Korea's weapons tests. The current downturn will end. As marginal players exit the market, the stronger hands position themselves for the next catalyst.