Bitcoin at $100,000 in 2021? Scandalous for some, obvious for funders

Bitcoin investors, which include top hedge funds and fund managers, are betting virtual currency could more than quintuple to $100,000 in a year.

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

Bitcoin is in sight of its all-time high of just under $20,000 reached in December 2017. It debuted in 2011 at zero and last traded at $18,415.

Going from $18,000 to $100,000 in one year is no small feat, said Brian Estes, chief investment officer at the hedge fund Off the Chain Capital.

“I’ve seen bitcoin go up 10X, 20X, 30X in a year. So going up 5X isn’t a big deal.”

Estes predicts that bitcoin could reach between $100,000 and $288,000 by the end of 2021, based on a model that uses the stock-to-flow ratio measuring the scarcity of commodities like gold. This 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 to $318,000 by the end of next year, citing its limited supply, ease of movement through borders and its opaque property.

These numbers are, however, a scraper for Toronto-based Kevin Muir, an independent owner-trader.

Any Bitcoin hedge fund model sucks. You can’t model a fad, Muir said. “Is that plausible? Sure. It’s a fad. But does anyone really have an idea? Not a chance.”

DEARTH OF SUPPLY

Bitcoin relies on so-called “mining” computers that validate blocks of transactions by competing with each other to solve mathematical puzzles every 10 minutes. The first to solve the puzzle and clear the transaction is rewarded with new bitcoins.

Its technology was designed to cut miners’ rewards in half every four years, a move meant to curb inflation. In May, bitcoin suffered a third ‘halving,’ which reduced the rate of new coin creation, limiting supply.

This halving reignited the rise of bitcoin.

Square and PayPal’s Cash app, which recently launched a crypto service to its more than 300 million users, have picked up all new bitcoin, hedge fund Pantera Capital said in its letter to investors on Friday. This has caused a shortage of bitcoin and has fueled the rally in recent weeks.

BUY BIG FUNDS?

The so-called whale index, which counts addresses or wallets containing 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 institutional money has burst in.

Investors like Stanley Druckenmiller, founder of hedge fund Duquesne Capital, and Rick Rieder, investment director of BlackRock Inc for global fixed income, recently touted bitcoin.

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

Neo predicts that bitcoin will hit $60,000-80,000 by the end of 2021.

Tempus Inc currency trader Juan Perez was unimpressed, if not shocked, with all the high forecasts and said a $100,000 bitcoin bet next year would be a collapse bet. of the global financial system.

Governments around the world will not let this happen. They will not let fiat currencies collapse like this, Perez said.