Bitcoin this week surpassed US$70,000 for the first time since early June, with several market analysts tipping that it’s only a matter of time before the cryptocurrency breaks into new territory.
eToro market analyst Josh Gilbert said: “If a new record high is reached and we move into price discovery, bitcoin could potentially reach six figures within a few months, particularly given the current cocktail of strong catalysts.”
What’s more, others are speculating that the cryptocurrency is poised to enter a “super cycle”.
Namely, a recent article from Forbes pointed to the resemblance bitcoin now bears to the early stages of tech giants like Apple, when they first entered a phase of sudden stock market price surges.
BTC, the outlet said, is now increasingly trading like a financial instrument, syncing up with global markets and benefitting from institutional uptake.
However, according to Global X investment strategist Marc Jocum, the infant asset class still operates as a “chameleon”, with its behaviour still largely dependent on unknowns.
“It still needs testing across various market cycles to determine its true correlations, diversification potential, and volatility profile,” Jocum told InvestorDaily.
Though bitcoin’s volatility has declined from historic levels, the market strategist suggests that this doesn’t necessarily equate to the beginning of a super cycle.
“Bitcoin remains somewhat correlated with broader equity markets, though less so than before, indicating continued influence from global equity markets,” he added.
AMP’s Shane Oliver agreed that it’s too early to declare the existence of a super cycle, but similarly noted that upswings – and downswings – in bitcoin’s price are increasingly becoming less pronounced.
“If you look at the value of bitcoin today compared to when it came on – and it has made phenomenal returns – each cycle in bitcoin is seeing lower and lower gains,” Shane told InvestorDaily.
“From peak to peak or trough to trough, it’s sort of generating less upswing, because as it becomes a more mainstream investment, the gains are behind us.”
The economist conceded that, in this process, the cryptocurrency is beginning to show signs of stability.
“There’s more of a regulatory focus around it. So it’s moving from the Wild West investment world to something which is more regulated.”
The asset class, according to Oliver, is also beginning to present more like a “high beta version of shares”.
“When shares go down, [bitcoin] goes down a lot more. When shares go up, it goes up a lot more. It’s still affected by fundamentals around it, such as anticipation of the halving, but I think it’s too early to say whether the four-year cycle will come or not.”
While the likes of increased institutional investments and the adoption of crypto ETFs also appear to be improving things on the volatility front, the economist said every chance still exists that bitcoin could “fall into a heap”.
“If bitcoin doesn’t perform over years, you could start to see a questioning of it. And so the bitcoin ETF exposures could sort of operate as an albatross around its neck,” Oliver explained.
According to Jocum, investors still need to be able to stomach the potential for rising volatility and drawdowns.
“Volatility is the price of admission investors pay for the potential of higher returns than leaving their money in cash, and having a broad portfolio of asset classes to complement cryptocurrencies like equities, bonds and gold may help smooth returns and reduce overall volatility,” Jocum concluded.
