Thomas Lee, the Co-founder of Fundstrat, well-known for his Bitcoin price predictions and in-depth understanding of the Bitcoin markets, tweeted about the relationship between emerging markets and the price of Bitcoin. According to his tweet, Bitcoin needed to pump up to $10,000 to $20,000 to catch up to the equities.
Tom Lee tweeted,
“CRYPTO (1/2): earlier this year, we noted the “macro” factors such as rally in risk assets plus USD no longer surging are tailwinds 4 $BTC #bitcoin
Chart shows EM in 2018 pulled down $BTC. Notice especially how #bitcoin tried to diverge in late 2018 but ultimately succumbed”
According to Tom Lee, the price of Bitcoin was facing tailwinds from rallies in risk assets as well as the US Dollar not surging. If the USD surges, the ratio of BTC/USD pair would be reduced. Tom Lee also elaborated on the relationship between emerging assets [EM] and the price of Bitcoin.
Lee implied that EM pulled the price of Bitcoin down, causing the divergence in the chart attached above. However, EM succumbed and finally crossed the price.
Tom Lee’s tweets on EM and Bitcoin price suggest a correlation between the two. From the assumption, since the EM is above the price and rising, this suggests that Bitcoin is bullish and is facing tailwind.
Lee posted the second part of the thread,
“CRYTPO (2/2): natural question is how much implied upside #bitcoin to “catch up” to macro.
S&P 500+small-cap rally since 12/24 is >2 std dev.
1-std dev for $BTC is +185% gain. “Catching up” to equities implies $10k-$20k.
NOT OUR BASE CASE. Just highlighting macro tailwind.”
Additionally, the standard deviation of S&P 500, Russel small-cap is greater than 2, but that of Bitcoin is negative 0.26. The standard deviations provided are used to calculate the Z score, which will help compare the rallies of equities, and predict the price of Bitcoin. Further, the calculation of the standard deviations and the Z score were done between December 24, 2018, and January 19, 2019.
According to Lee, Bitcoin needs to pump by approximately 185% to reach its ideal standard deviation. If the coin does so, the price of Bitcoin would be $19,635 if it undergoes the same rally and reaches its standard deviation of 2.04.
Bitcoin would be worth $20,448 if it underwent the same rally as Russel Small-cap and had the standard deviation of 2.16. The price would be $10,078 if BTC underwent the same rally as EM.