Bitcoin broke the $50,000 mark on Tuesday and hit a new high above $51,700 on Wednesday, inspiring confidence in some that it could trade at $100,000 in the next 12 months and warnings from others that its trajectory is unsustainable.
Virginia-based enterprise software company MicroStrategy, which already owned nearly $3.6 billion worth of bitcoin, based on its price Tuesday, said it plans to sell $600 million in convertible debt to buy more.
This is the “year of institutional investment” in cryptocurrencies, MicroStrategy CEO and bitcoin evangelist Michael Saylor told CNBC’s “Crypto Trader”.
MicroStrategy’s bitcoin moves are “a warning sign if there ever was one that things are getting out of hand in the crypto world,” wrote Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Pte, in emailed comments, Bloomberg reported.
Helping bitcoin’s price rise was Elon Musk’s Tesla, which announced earlier this month that it had bought $1.5 billion worth of bitcoin. Support also came from the oldest bank in the U.S., Bank of New York Mellon, which said it plans to integrate bitcoin and other digital currencies into the same financial network it uses for more traditional holdings such as U.S. Treasury bonds, equities and tech stocks.
Hedge fund manager Anthony Scaramucci predicted that the huge bitcoin price rally could still have a lot more runway left. Scaramucci announced at the beginning of the year that his New York-based fund of hedge funds, Skybridge Capital, had started the Skybridge Bitcoin Fund.
Scaramucci said he thinks “a billion people will be using (bitcoin) in five years.” Bitcoin could “easily trade” at $100,000 in the next 12 months, he told Yahoo Finance.
“Never mind that bitcoin’s persistent flaws, from relatively slow transaction speeds to wild price swings, make it a poor store of value or medium of exchange,” Laurent wrote. “The promise of life-changing wealth during lockdown is a strong draw for eager punters. Beyond the memes, wealthy financiers and billionaires are loudly loading up on digital gold, drowning out any skeptical voices … wealthy hedge-funders like Paul Tudor Jones and Stanley Druckenmiller are on board.”
Gold enthusiast and bitcoin skeptic Peter Schiff has long predicted that the crypto market is heading towards a bubble.
“Comparing the return on Bitcoin to return on gold is irrelevant, as #Bitcoin and #gold have nothing in common,” Schiff tweeted, defending his favorite precious metal. “They are not competing assets. It’s like comparing the return on gold to the return on Tesla. During bubbles, lots of assets beat gold. Gold wins once those bubbles pop”.
Price volatility is an obstacle to bitcoin seeing significant gains beyond current levels around $51,000, according to analysts at investment banking giant JPMorgan. The analysts compared bitcoin’s high volatility relative to gold, the classic inflation hedge, in a note on Tuesday reported by Reuters.
“Bitcoin’s three-month realized volatility, or actual price moves, is 87 percent versus 16 percent for gold – an asset, proponents say it could threaten,” the investment bank said, according to Coindesk.
After bitcoin rose above $50,000 and exceeded his expectations, gold bug Schiff revised his stance, tweeting “I must admit that a move up to $100,000 can’t be ruled out.” However, Schiff warns that the price could still drop to zero.
“If you don’t want to gamble buy #gold,” Schiff tweeted.