Wall Street Strategist Creates “Bitcoin Misery Index”, Which Signals Its Time to Buy

Francisco Memoria
  • TA Wall Street strategist created a "Bitcoin Misery Index" that signals when to buy bitcoin
  • The index is currently at the lowest it's been since September 2011, signaling its a time to buy

Bitcoin bull Tom Lee, the only Wall Street strategist covering Bitcoin and the co-founder of Fundstrat Global Advisors, recently created a “Bitcoin Misery Index.” The index works like most sentiment indicators, and is meant to be a contrarian one. This means that when it’s low, it’s time to buy the cryptocurrency. The index ranges from 0 to 100, and is now at 18.8.

According to Tom Lee, when the misery index hits “misery” (falls below 27), bitcoin sees “the best 12-month performance.” In the past, bitcoin has experienced several bull runs after falling below the 27 mark. Its current value of 18.8 is the lowest it’s been since September 6, 2011.

The Bitcoin Misery Index takes into account several factors. Among them are the number of winning trades out of the total, and the cryptocurrency’s volatility, according to Tom Lee. He said:

“The BMI [Bitcoin Misery Index] is telling us to keep the negative headlines in perspective. When the BMI is at a 'misery' level, future returns are very good."

Tom Lee

Lee’s report and new misery index come at a rough time for bitcoin and the cryptocurrency ecosystem in general. One of the biggest cryptocurrency exchanges, Binance, just faced hacking rumors while it thwarted a ‘large scale’ theft attempt. Japan’s Financial Services Agency (FSA) suspended two cryptocurrency exchanges for one month, as the result of poor security and compliance standards.

Moreover, Mt Gox trustee Nobuaki Kobayashi revealed he has sold roughly 35,800 BTC and 38,000 BCH, which roughly equals $405 million taking into account the dates in which these coins were sold. Kobayashi is still in possession of about 160,000 BTC, and further liquidations could be coming.

In light of these events, bitcoin’s price has been declining in the past few days. At press time, the flagship cryptocurrency is down by 3 percent, and is currently trading at $8,800, according to data from CryptoCompare.

Speaking to Barron’s, Tom Lee revealed that the Mt Gox liquidation, depending on tis magnitude, could be painful in the short term, but not a deal breaker. To the Wall Street strategist, some of the money bitcoin is being sold for will end up coming back.

In his report, Lee maintained his $20,000 mid-year bitcoin price target, and his $25,000 year-end target.

50% of Bitcoin Wealth Held by Just 1,800 Wallets

Neil Dennis

The distribution of bitcoin and cryptocurrency wealth is more concentrated than global wealth - and always has been - according to new research.

Blockchain monitoring platform PARISQ says that bitcoin is almost 50 times more concentrated in the hands of the few than global wealth. Ether's distribution, meanwhile, is 300 times more concentrated.

This means, according ot research shared with CryptoGlobe, that to enter the top 50% of bitcoin wealth, a person would need to own 347 bitcoins - worth at current prices $3.6 million. This 50% of bitcoin wealth is controlled by 0.023% of wallet addresses. By comparison, 50.1% of global wealth is controlled by 1% of the world's population.

PARSIQ dataSource: PARISQ

PARISQ's research shows that 1,805 wallet addresses control half of all bitcoins in circulation. Expanded to the top five cryptocurrencies by market capitalization, just 6,457 individual wallets addresses control all assets.

Whale Wallets

The largest such holders of cryptocurrency - particuarly bitcoin - are know colloquially as "whales", and with such concentrated holdings of assets by relatively few investors raises the danger of price volatility should any whale decide to sell a large slice of their holdings.

Such large transactions are often completed undercover - perhaps by special arrangement with crypto exchanges - so that prices remain relatively stable. It is the goal of any trader, however, to buy low and sell high, and it remains totally within the whale's power to manipulate the market in its favour. Such strategies are the staple diets of hedge funds.

It is thought the major holders of this concentration of bitcoin and crypto wealth are founders, early adopters and institutions such as hedge funds and investment houses.

Indeed, PARISQ's co-founder Andre Kalinowski said:

Cryptocurrencies were created with the desire to create a more egalitarian society away from government manipulation and centralized control. However, the latest research has found that cryptocurrency wealth is controlled by a small number of early adopter and exchange-owned whale wallets.

Monitoring Manipulation

Among the top five cryptocurrencies by market cap, XRP is the most concentrated, with just 14 wallets controlling 50% of the market. Ether comes next with 50% of all digital tokens held by 346 wallets.

The research found that much hadn't changed in years. Kalinowski added that although mass media interest during the crypto-market's peak between December 2017-February 2018 brought significant interest from retail investors, very little has changed under the surface. The whales still hold cryptocurrencies long-term and still have the ability to move the markets. He concluded:

The fact is, the transparency that’s part of the DNA of cryptocurrencies has been clouded by the size and complexity involved in analysing these cryptocurrencies. It’s time to open up the blockchain to everyone, to encourage fairer wealth distribution, or at least ensure the whales are more accountable through better monitoring.