Bitcoin investors, which include top hedge funds and money managers, are gambling the digital money could more than quintuple to as large as $100,000 in a year.
It is a bet that’s attracted eye-rolls from sceptics who think the volatile cryptocurrency is a speculative asset rather than a store of value like gold.
Bitcoin is within sight of its all-time summit of just under $20,000 hit in December 2017. It debuted in 2011 at zero and was trading at $18,415.
Going from $18,000 to $100,000 in 1 year isn’t a stretch, Brian Estes, chief investment officer at hedge fund Off the Chain Capital, said.
“So going up 5X is not a big deal.”
Estes forecasts bitcoin could hit between $100,000 and $288,000 from end-2021, according to a model that uses the stock-to-flow ratio quantifying the lack of commodities such as gold. That model, he explained, has a 94% correlation with the purchase price of bitcoin.
Citi technical analyst Tom Fitzpatrick stated in a note that bitcoin could climb as high as $318,000 by the end of next year, mentioning its limited supply, ease of movement across borders, and opaque ownership.
Those numbers are a head-scratcher to get Toronto-based Kevin Muir, a different proprietary trader.
“Any hedge fund model on bitcoin is rubbish. Is it plausible? For sure. It’s a mania. Not a chance.”
DEARTH OF SUPPLY
Bitcoin is based on so-called “mining” computers which validate blocks of trades by competing to solve mathematical puzzles every 10 minutes. The first to solve the puzzle and clear the transaction is rewarded fresh bitcoins.
Its technology was designed to cut the benefit for miners in half every four years, a move meant to curb inflation. In May, bitcoin went through a third “halving,” that reduced the pace at which coins are created, restricting distribution.
That halving has kickstarted bitcoin’s revived ascent.
Square’s Cash App and PayPal, which recently launched a crypto service to its over 300 million users, have been scooping up fresh bitcoins, hedge fund Pantera Capital stated in its letter to investors on Friday. That has caused a bitcoin shortage, and it has pushed the rally in the last few weeks.
BIG FUNDS BUYING?
The so-called whale indicator, which counts wallets or addresses holding at least 1,000 bitcoins, is at an all-time large, stated Phil Bonello, study manager at electronic asset manager Grayscale. Bonello said over 2,200 addresses were connected to large bitcoin holders up 37% from 1,600 in 2018, suggesting that institutional cash has stormed in.
Investors such as Stanley Druckenmiller, founder of hedge fund Duquesne Capital, and Rick Rieder, BlackRock Inc’s chief investment officer of international fixed income, have recently touted bitcoin.
Retail investors however are still largely side-lined because of the pandemic’s effect on the market. However, with the entry of Square and PayPal, Lennard Neo, head of research at crypto index finance supplier Stack Funds, expects a deluge of retail need more intense than in 2017.
Neo predictions bitcoin to reach $60,000-$80,000 at the end of 2021.
Tempus Inc currency dealer Juan Perez was unimpressed, even stunned, together with the lofty predictions and stated a wager on bitcoin at $100,000 next year could be a bet about the collapse of the international financial system.
“Governments around the world won’t let that happen. They will not let fiat currencies collapse just like that,” Perez said.
The team at Platform Executive hope you have enjoyed this news article. Initial reporting via our official content partners at Thomson Reuters. Reporting by Gertrude Chavez-Dreyfuss. Additional reporting by Ritvik Carvalho in London. Editing by Alden Bentley and Cynthia Osterman.
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