Bitcoin entered uncharted territory on Wednesday after breaching $10, 000 for the first time, leaving investors to wonder how long the rally will go — and whether it will end in tears.
The digital currency climbed as much as 4. 4 percent to a record $10, 379. 53 during Asia trading hours, capping a more than 10-fold increase this year. Its market value has surpassed $176 billion, according to Coinmarketap. com.
Here’ s what bitcoin watchers are saying about the dizzying rally.
Arthur Hayes at BitMEX
“ They said it was a bubble at $1, 000, they said it was a bubble at $5, 000 and they said it was a bubble at $10, 000, ” said Hayes, chief executive officer and co-founder of Hong Kong-based BitMEX, a cryptocurrency derivatives venue. “ Shorting anything is a very dangerous game, especially if you’ re shorting into a transformational monetary system. These transformational experiences happen once every few hundred years and are extremely chaotic. ”
Hayes, who was speaking on the phone from New York after attending the Consensus: Invest cryptocurrency conference, said he saw more people wearing suits than jeans and hoodies — a sign of growing interest on Wall Street.
“ The fear of missing out is becoming stronger and stronger, ” he said. “ The traditional asset manager or investor, banker who has probably poo-pooed bitcoin the past few years is now paying upwards of thousands of dollars to hear about how they can get involved in this new industry. ”
Hayes said bitcoin may reach $50, 000 by the end of 2018.
Stephen Innes at Oanda
“ I’ d be a little bit worried on a falling knife scenario, ” said Innes, head of trading for Asia-Pacific at Oanda Corp. in Singapore. “ Are current investors prepared for this? No, of course not. ”
Longer term, cryptocurrencies will gain more credibility as CME Group Inc. starts selling bitcoin futures and other mainstream institutions get involved, Innes said. For now, he sees a short-term pullback of 3 percent to 6 percent as investors take stock of how much they’ ve gained.
“ When we’ re starting to get into these crazy numbers, I’ m a little bit fearful that retail traders are jumping in under the false guise of this will run on forever, ” he said. “ We know things never go in a straight line. ”
Jehan Chu at Kenetic Capital
“ If you look at the kind of trajectory not just of the currency and the price, but really of the mind share among influencers, among governments, among central banks, among enterprises — that’ s actually where I see the real guideposts of where the price will go, ” said Chu, managing partner at cryptocurrency fund Kenetic Capital in Hong Kong, who first bought bitcoin at about $1, 100 in 2013.
“ One of the main factors is the settling down of the civil wars that have been raging on, ” Chu said, referring to intense debate within the industry over technology upgrades that resulted in the formation of a rival coin called bitcoin cash. “ There’ s much less drama at the moment at least. One side has disarmed and that has really provided a clear path ahead to show that the ecosystem can grow in a more predictable manner. ”
Chu sees some risk of a correction, but not a major one, and said that high prices will ironically serve to draw more institutional interest.
Dave Chapman at Octagon Strategy
“ Now, you’ re getting an enormous amount of legitimacy and credibility in the bitcoin protocol, ” said Chapman of cryptocurrency trading firm Octagon Strategy in Hong Kong. “ Admittedly, there is an element of FOMO (fear of missing out). That’ s not entirely healthy for the current market. There is a sizable amount of people investing in bitcoin purely on speculation. ”
Chapman sees a correction coming, but is unsure how large it will be.
“ I see possibly a correction but then also an immediate bounce-back just owing to the size of the market. People will double down and see it as a buying opportunity. ”
Gavin Yeung at Cryptomover
“ Owning a whole bitcoin is now a status symbol, ” said Yeung, CEO of Hong Kong-based investment company Cryptomover. “ We are coming to see that bitcoin itself is a Veblen good. The higher the price, the more desirable the product is to the general public. ”
Lewis Fellas at Bletchley Park Asset Management
“ The principal driver has been the proposed CME futures contract, which has really woken up Wall Street, ” said Fellas, chief investment officer at Bletchley Park Asset Management, which invests in cryptocurrencies. “ The secondary driver is media coverage. It’ s fueling a fear-of-missing-out as we set successive new highs, luring people in for a quick profit ahead of the futures contract. ”
The risk of a near-term retreat is real as regulators could still block or delay the proposed futures, Fellas said. “ A delay or ‘ no’ could easily trigger a 30 to 40 percent correction. ”