Originally published on Forbes.com
Aren’t You Glad You Kept Your Bitcoin? Don’t Sell It.
By Kenneth Rapoza, Senior Contributor
Aren’t you glad you kept that Bitcoin? I know I am.
Even with the recent decline from its highs, coming close to $20,000, investors have been bullish. Is it going to $50,000? Nope. It’s going to $500,000, some on the Street have told me (hint: she runs a big, innovative ETF). These are the wild speculative prognostications that make Bitcoin what it is. But keep it. Even if it goes to $5,000 again. We’ve seen that what comes around, goes around.
It took over 1,000 days since Bitcoin hit its previous all-time high, recorded in December 2017.
“We are buyers at this price as we believe Bitcoin will appreciate over the short-, medium- and long-term,”says Daniel Wolfe, fund manager at the Simoleon Long Term Value Cryptocurrency Fund, which he runs in partnership with SPRING, a Moscow-based investment firm. “Taking a three to five year view and dollar cost averaging into a position that represents around 5% of your portfolio is prudent today.”
Okay, but are we at liftoff yet? You know, that Bitcoin Moon thing.
“The next nine months will bring substantial appreciation for Bitcoin,” Wolfe thinks. “I would not be surprised to see $50,000 next summer. Within four years, we expect the capitalization of all cryptoassets to grow five-fold, with Bitcoin at $100,000,” he told me last week.
There are a number of factors driving the stellar rise of Bitcoin this year. Microstrategy MSTR -0.9% and Square SQ +0.6%, for example, have been buyers. Major investors like Paul Tudor Jones and Stanley Druckenmiller are in.
The availability of institutional-level infrastructure has eased their entry: Fidelity’s custody solution is one example. Second, the so-called halving of the BTC reward (since May 11 each block carries a 6.25 BTC reward in lieu of the 12.5 BTC reward before the halving) means that more of the new demand must be satisfied on the open market as miners cannot keep up.
Historically, the halving has led to a new peak in the BTC price 13-15 months after the reduction in the BTC reward.
Buying and holding BTC has become easier for retail investors. PayPal PYPL +3.4% now allows its 350 million users to buy and hold Bitcoin using their existing accounts, something that Robinhood and other fintech companies also allow now.
“I think the reason behind the growth is the dollar which we foresee weakening against other reserve currencies. Any respectively stable assets and property are the most attractive investment,” says Nikita Zuborev, head of marketing at the 13-year old BestChange.com, a free Russian exchanger aggregator.
“The market for cryptocurrencies has changed,” Zuborev says. A lot of derivatives, futures and options trading has launched in recent years. Bitcoin has gained a significant share of the crypto trading market. “Despite the ‘DeFi fever’ holds a dominant position in contrast to the trends of 2017 when the previous price record was set,” he says.
“DeFi” means decentralized finance, or peer-to-peer financing done over a blockchain ledger that eliminates the middle man — usually banks and brokers.
Bitcoin’s amazing run this year is also due to new money coming in, says Benjamin Duval, CEO of 4C-Trading and UpBots, a Swiss trading interface for cryptocurrencies, DeFi, forex and commodities located in Zug, Switzerland. “There is a more stable market with more advanced projects…with long term solutions offered by DeFi for example,” he says. The growth of this segment of crypto, or rather — its promise — is enticing investors to keep their capital invested instead of selling it for hard currency.
“Three years ago, in November and December, Bitcoin grew to $20,000 — and the reason for that was human greed. There was no widespread application of the technology that could justify that growth,” says Gapporov Behkzod, CEO of Okschain, a new generation decentralized financial service using crypto. “People were looking to get quick and lost a lot in the panic,” he says about those heady days in 2017.
“Bitcoin is still at the beginning of its story,” Behkzod says. “There’s more growth and corrections to come. I won’t try to make a prediction, but I suppose that we will see a $1,000,000 Bitcoin price — and that is not a limit. A lot of our colleagues working with vast volumes daily are already talking about this,” he says. “These are the guys who have the vision.”
Regulations are also moving forward. That’s always been a sticking point for those who wanted to make cryptocurrency a real industry. They wanted some more transparency and new that was a sticking point before bigger money would jump in.
All the elements are gathering now, says Duval from Switzerland. “Even if a decrease in price occurs in the coming weeks, 2021 should see a new peak for virtual currencies and it would not be surprising to see Bitcoin hit the $50,000 to $80,000 mark,” he says.
In some ways, the pandemic has emphasized the need for market-resistant investment opportunities in 2021. What began as demand for inflation-beating interest rates has now become a deeper need for growth and security.
“People want to diversify into alternative investments and cryptocurrencies offer everything from collateral-backed lending to store-of-value protection to forex-style trading,” says Chris Roper, communications chief for alternative finance startup, MyConstant. They matched $16.6 million in crypto-backed loans — their core business — in the third quarter this year. It was a record quarter for them.
Paypal will make Bitcoin a household name, Roper says. “You’ll get a new generation of investors in the crypto-ecosystem seeking growth in challenging economic times.”
If Bitcoin looks too expensive, there’s always the other two darlings of the crypto world — Ripple XRP and Ethereum, priced at $0.51 and around $571, respectively.
“Alternative coins usually follow the movement of the Bitcoin price, but the difference is that it is easier to have a speculative effect on them — so, sometimes, we will see a discrepancy in the charts,” says Oleg Fakeev, a well known crypto investor and founder of Kit Investments, a crypto investment community. “The superiority in the capitalization of Bitcoin over other coins is one of the few factors that protects it from constant manipulation by large players,” he says.
Ethereum’s creator, the Russian-born Vitalik Buterin, has redone the smart contracts used by Ethereum, but explaining that is way above my pay grade. Investors in crypto got excited about it. Even Tim Pool was speaking about this weekend on his YouTube broadcast.
“Interest is undoubtedly growing,” says Fakeev about cryptocurrencies in general, not just Bitcoin. “Markets are exchanging audiences — those who have invested only in cryptocurrencies went into the stock market, and stock market investors, having made sure that Bitcoin survived the ‘test of time,’ are starting to invest in cryptocurrencies.”
Behkzod thinks crypto’s man of the year, however, is fellow Russian Buterin.
“If there was no Ethereum smart contracts, I think there would be a collapse in (crypto) supply and demand,” he says. “Ethereum will develop more in the future. It’s going to grow,” he says. “I’m following the same goals as Buterin at Okschain,” he says, hoping that some of this resurgent crypto pixie dust can rub off on him and what is apparently a rash of new investors rediscovering what was once nearly left for dead.
The “crypto winter” appears to have ended,” Roper says. “It’s an exciting time with the entry of Square and Paypal. The industry is maturing.”