As bitcoin approaches $20,000 a coin, backers of the cryptocurrency are predicting that it can top off at unthinkable highs – including one analyst who believes it could reach well over $300,000.
Speaking to CNBC, Ronnie Moas founder and research analyst at Standpoint Research believes that the bitcoin craze is nowhere near its peak, and that his ‘conservative’ estimate would place the crypto at between $300,000 and $400,000 (between R3.8 million and R5.1 million).
This is because of a massive supply and demand imbalance, where the Bitcoin blockchain will only ever produce 21 million coins, while an estimated 300 million people will be looking to own them.
“I don’t know how much gold there is in the ground, but I know how much bitcoin there is, and in two years there will be 300 million people in the world trying to get their hands on a few million bitcoin,” Moas told CNBC.
Moas has been fairly on the mark with his bitcoin predictions – at least on the trend, if not the numbers. He has been one of the more aggressively bullish backers of the cryptocurrency, previously adjusting his forecasts for 2018 from $7,500 a bitcoin to $11,000.
Bitcoin is now trading at over $18,300, completely blowing past these predictions. Local exchange, Luno, is quoting bitcoin at R292,000.
According to Moas, a $300,000 estimate at this stage is “conservative” as demand will drive up the price – and there is no indication that demand is slowing. With the introduction of bitcoin futures by major financial groups, there is a persisting idea that this is the case.
However, while the bulls are excited, the bitcoin bears are still insisting that we are witnessing the ‘greatest bubble of our time’.
Investors, including Oliver Isaacs and analysts from JPMorgan Chase and Credit Suisse are holding firm that the trend seen in bitcoin is exhibiting textbook bubble behaviour – and it’s getting ready to burst.
While financial institutions generally accept that a bitcoin bubble bursting won’t have much of an impact on the wider economy due to its self-contained nature, Isaacs believes that it will be incredibly damaging to those invested in it.
Speaking to Express in the UK, Isaacs said that on the back of recent gains, the price of the ‘tradable asset’ will spiral out of control. Unstable trading, combined with a lack of regulation or governance, means that something has to give, and the bubble will pop.
“If you invest in bitcoin you can make a significant amount of money, but similar to investing in the Stock Market it is important to be cautious and prevent putting all your eggs in one basket. Due to the lack of bitcoin regulation, investing in bitcoin is a risky business and no one knows if or when bitcoin will crash,” he said.
A recent article by local financial expert Jayson Coomer provided insight into the potential hyperdeflation narrative to explain bitcoin’s meteoric rise.
According to Coomer, there is a very high level of wealth concentration with bitcoin, where most of the available coins are held by very few people. The vast majority of wallet addresses (96%) own only 3.5% of the coins (as of September 2017).
This low level of supply amid high levels of demand keeps pushing the price up in a spiral: people want bitcoin and bid higher for it – holders see the price rise and keep holding. This, in turn, pushes demand higher, bids higher, and incentivises long-term holders to keep holding. And so it continues.
However, while Coomer describes the price spiral as a bubble, he says it different in that most bubbles have leverage or credit in some way (and bitcoin doesn’t really), and that there is a strong drive from ‘fans’ of the cryptocurrency, which has given it its own momentum.
You can read the full article on the Rolling Alpha.