NEW YORK (Reuters) – Bitcoin investors, which include major hedge funds and money managers, are betting that virtual currencies could exceed quintuple to as high as $ 100,000 in a year.
He is a wager who has pulled eye rolls from skeptics who believe that the volatile cryptocurrency is a speculative asset rather than a store of value like gold.
Since January, bitcoin has gained 160%, complemented by strong institutional demand as well as shortages as payment companies like Square and Paypal buy it on behalf of customers.
Bitcoin is within sight of its all-time high of just under $ 20,000 hit in December 2017. It ended in 2011 at zero and was last trading at $ 18,415.
Going from $ 18,000 to $ 100,000 in one year is not an extension, said Brian Estes, chief investment officer at hedge fund Off the Chain Capital.
“I’ve seen bitcoin go up 10X, 20X, 30X in a year. So going up 5X is not a big deal. ”
Estes predicts bitcoin could hit between $ 100,000 and $ 288,000 by late-2021, based on a model that uses the stock-to-flow ratio to measure commodity shortages such as gold. That model, he said, has a 94% correlation with the price of bitcoin.
Citi technical analyst Tom Fitzpatrick said in a note last week that bitcoin could climb as high as $ 318,000 by the end of next year, citing its limited supply, ease of movement across borders, and opaque ownership.
Those numbers are nevertheless a head scratcher for Kevin Muir of Toronto, an independent proprietary trader.
“Any hedge fund model on bitcoin is rubbish. You can’t model mania, ”said Muir. “Is it credible? Certainly. It’s mania. But does anyone really have a clue? No chance. “
Bitcoin relies on so-called “mining” computers that validate blocks of transactions by competing to solve mathematical puzzles every 10 minutes. The first to solve the puzzle and clear the transaction is rewarded new bitcoins.
Its technology was designed to cut the miners’ prize in half every four years, a move that was supposed to curb inflation. In May, bitcoin went through a third “halving,” which lowered the rate at which new coins are created, limiting supply.
That halving has started bitcoin’s new ascent.
Cash App and PayPal Square, which recently launched a crypto service to its more than 300 million users, have been grabbing all new bitcoins, hedge fund Pantera Capital said in its letter to investors on Friday. That has caused bitcoin shortages and driven the rally in recent weeks.
BIG FUNDS BUYING?
The so-called whaling index, which counts addresses or wallets holding at least 1,000 bitcoins, is at an all-time high, said Phil Bonello, Grayscale’s digital asset manager research director. Bonello said more than 2,200 addresses were linked to major bitcoin holders, up 37% from 1,600 in 2018, suggesting institutional funding had stormed in.
Investors like Stanley Druckenmiller, founder of hedge fund Duquesne Capital, and Rick Rieder, chief global investment officer of BlackRock Inc, have recently touched on bitcoin.
Even so, retail investors remain marginalized largely because of the economic impact of the pandemic. But with Square and PayPal access, Lennard Neo, head of research at Stack Funds, a crypto index fund provider, expects a tighter flow of retail demand than in 2017.
Neo predicts bitcoin will reach $ 60,000- $ 80,000 by the end of 2021.
Tempus Inc money trader Juan Perez was unfazed, even in shock, with all the high forecasts and said a bet on bitcoin at $ 100,000 next year would be a bet on the collapse of the global financial system.
“Governments around the world will not let that happen. They won’t let the fiat currency collapse just like that, ”Perez said.
Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Ritvik Carvalho in London; Editing by Alden Bentley and Cynthia Osterman