Bitcoin at $100,000 in 2021? Outrageous to some, a no-brainer for backers

By Gertrude Chavez-Dreyfuss

 

FILE PHOTO: A Bitcoin (virtual currency) paper wallet with QR codes and a coin are seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, May 27, 2015. REUTERS/Benoit Tessier

 

NEW YORK (Reuters) - Bitcoin investors, which include top hedge funds and money managers, are betting the virtual currency could more than quintuple to as high as $100,000 in a year.

 

It's a wager that has drawn eye-rolls from skeptics who believe the volatile cryptocurrency is a speculative asset rather than a store of value like gold.

 

Since January, bitcoin has gained 160%, bolstered by strong institutional demand as well as scarcity as payment companies such as Square and Paypal buy it on behalf of customers.

 

Bitcoin is within sight of its all-time peak of just under $20,000 hit in December 2017. It debuted in 2011 at zero and was last trading at $18,415.

 

Going from $18,000 to $100,000 in one year is not a stretch, Brian Estes, chief investment officer at hedge fund Off the Chain Capital, said.

 

"I have 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 end-2021, based on a model that utilizes the stock-to-flow ratio measuring the scarcity of commodities like 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 though are a head-scratcher for Toronto-based Kevin Muir, an independent proprietary trader.

 

"Any hedge fund model on bitcoin is rubbish. You can't model a mania," Muir said. "Is it plausible? For sure. It's a mania. But does anyone actually have a clue? Not a chance."

 

For a graphic on Bitcoin's 2020 rally:

 

https://fingfx.thomsonreuters.com/gfx/mkt/rlgpdaxbzvo/Pasted image 1605788019322.png

 

DEARTH OF SUPPLY

 

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 reward for miners in half every four years, a move meant to curb inflation. In May, bitcoin went through a third "halving," which reduced the rate at which new coins are created, restricting supply.

 

That halving has kickstarted bitcoin's renewed ascent.

 

Square's Cash App and PayPal, which recently launched a crypto service to its more than 300 million users, have been scooping up all new bitcoins, hedge fund Pantera Capital said in its letter to investors on Friday. That has caused a bitcoin shortage and has driven the rally in the last few weeks.

 

For a graphic on Bitcoin: a volatile history:

 

https://fingfx.thomsonreuters.com/gfx/mkt/oakvexeydpr/Pasted image 1605671582232.png

 

BIG FUNDS BUYING?

 

The so-called whale index, which counts addresses or wallets holding at least 1,000 bitcoins, is at an all-time high, said Phil Bonello, research director at digital asset manager Grayscale. Bonello said more than 2,200 addresses were linked to large bitcoin holders, up 37% from 1,600 in 2018, suggesting that institutional money has stormed in.

 

Investors like Stanley Druckenmiller, founder of hedge fund Duquesne Capital, and Rick Rieder, BlackRock Inc's chief investment officer of global fixed income, have recently touted bitcoin.

 

Retail investors though are still mostly sidelined due to the pandemic's effect on the economy. But with the entry of Square and PayPal, Lennard Neo, head of research at crypto index fund provider Stack Funds, expects a deluge of retail demand more intense than in 2017.

 

Neo forecasts bitcoin to reach $60,000-$80,000 by the end of 2021.

 

Tempus Inc currency trader Juan Perez was unimpressed, even shocked, with all the lofty 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 won't let that happen. They will not let fiat currencies collapse just like that," Perez said.

 

-- © Copyright Reuters 2020-11-24

 

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Pump and dump.

Sweet beta though.

Tulip bulbs.

 

Deja vu all over again.

1 hour ago, OneMoreFarang said:

I am sure someone had a similar idea about the following year in 2017...

So what's that graph of? Not Bitcoin, looks more like the Greyscale trust, but without any information the graph seems kind of useless?

Greyscale sort of follows BTC but very unpredictable at times. Their Etherium trust is even more erratic.

1 hour ago, Hamus Yaigh said:

So what's that graph of? Not Bitcoin, looks more like the Greyscale trust, but without any information the graph seems kind of useless?

Greyscale sort of follows BTC but very unpredictable at times. Their Etherium trust is even more erratic.

Sorry, I apologize. I googled for Bitcoin price over time and that graph came up first. But the header is "Grayscale Bitcoin Trust (Btc)" My mistake

 

Here is hopefully the correct graph. My point is and was obviously that not every high is followed by a higher high. Sometimes it goes down for a long time.

 

 

 

8 minutes ago, OneMoreFarang said:

Here is hopefully the correct graph. My point is and was obviously that not every high is followed by a higher high. Sometimes it goes down for a long time.

 

No doubt. But looks like a new price plateau was reached.

 

My personal strategy is to hold on to the bitcoin I had (see where it goes...) and speculate in the altcoins and <deleted>coins. The rationale is that bitcoin is at an all time high, but the smaller cryptos are still far away from it, and will eventually have to catch up?

 

On 12/2/2020 at 8:19 AM, impulse said:

Tulip bulbs.

 

Deja vu all over again.

There are likely 2 choices people have. Either guarantee their future financial status by buying BTC now, at just under 20k per coin. Or wait until it is more accepted and pay several times more.

 That Jamie Dimon is fully behind BTC now(after threatening to fire any staff member that bought BTC what 2 years ago?), that Paul Tudor Jones, Micro Strategy, Paypal, Guggenheim etc are all now backers and believers of BTC in its role as the new gold, you would be in a riskier position not having a small % of your wealth invested in it. IMO of course!

2 hours ago, TopDeadSenter said:

There are likely 2 choices people have. Either guarantee their future financial status by buying BTC now, at just under 20k per coin. Or wait until it is more accepted and pay several times more.

 That Jamie Dimon is fully behind BTC now(after threatening to fire any staff member that bought BTC what 2 years ago?), that Paul Tudor Jones, Micro Strategy, Paypal, Guggenheim etc are all now backers and believers of BTC in its role as the new gold, you would be in a riskier position not having a small % of your wealth invested in it. IMO of course!

 

Or the third choice.  Avoid it altogether.  And buy one of the hundreds of other cryptos coming on the market if you really have need for one. 

 

As a speculative gamble, maybe.  As a repository of wealth?  Who can afford to buy gold at $15,000, only to have it worth $4,000 a few months later- like when you need to cash it in to buy a house.  Doesn't sound like any kind of guaranty of future financial status- any more than tulip bulbs, Enron stock, ostriches or Beanie Babies.  All of which had their dedicated followers.

 

And I suspect the names you've mentioned are believers in crypto, and will be coming out with (or backing)  their own versions to compete with BTC.  Seems like a new one is announced just about every week- with some big names behind them.

 

It's definitely not an investment for those who aren't financially secure.   You really should have everything else taken care of first (homes/condos paid off, college funds for the kids in fiat... as that's what you'll need to pay it with, zero debt...), and only then consider having tranches of crypto.   I have some air gapped btc set aside just to see what happens to it, but at the same time... I do see that it is 'just' tech.   Remember when Intellivision and Atari 2600 game consoles were cutting edge 'tech?'