Cryptocurrencies just had a turbulent weekend, led by bitcoin, which saw its price fluctuate from $11,234 USD on Friday to a high of $12,956 on Saturday, only to descend to $10,399 by Monday morning. That volatility may be enough to scare away even the most courageous of investors, but some are still claiming that highs of $60,000 and even $100,000 are not out of reach for the world’s leading cryptocurrency.
Ari Paul, CIO of Blocktower Capital and previously a portfolio manager and risk specialist for the University of Chicago endowment, famously announced last month that it’s likely that bitcoin in 2018 will hit both $6,000 and $60,000, and even after a month of severe ups and downs, he’s sticking with his predictions.
“With a very small portion of our assets, we’ve bought $50,000 strike calls,” he said to CNBC. Reportedly, Blocktower has purchased $1-million worth of options that offer a 30-times payout if the price of bitcoin gets to $50,000 by December, 2018, along with call options for bitcoin at $6,000.
Paul claims that the hyper-volatility of the currency puts both scenarios in play. “Bitcoin falls 30 per cent almost every other month, so it’s a hyper-volatile asset and these calls are a bet that if it’s volatile to the upside, we could easily see over $50,000 [in 2018],” he says.
“I’m trying to give investors access to the upside while I’m also very focused on risk management, and so these calls are a way for me to capture that upside exposure while actually owning less bitcoin,” says Paul.
Similar sky-high prices have been speculated by others, including Eran Eyal of e-commerce company Shopin, who has gone on the record saying that he has “no doubt” that bitcoin will go well beyond $100,000. “We have to remember that this is a very young market and that the trend is innately upward,” he says.
Yet, as governments around the world continue to grapple with the concept of the cryptocurrency, many are predicting stronger regulatory frameworks to be put in place sometime soon — even so far as a complete ban on cryptocurrency trading. If that happens in a place like South Korea, where cryptocurrency investment is substantial, the damage to the crypto-market would be huge, says Paul.
“If there’s an outright ban [in South Korea], I would expect a crash, meaning maybe a return to the September lows of, say, $3,000. That would be an extreme case, but we don’t expect a full ban. in South Korea,” he says.
Last week the US Securities and Exchange Commission (SEC) nixed the idea of creating exchange-traded funds (ETFs) for bitcoin and other cryptocurrencies, saying that it believes there are “a number of significant investor protection issues that need to be examined before sponsors begin offering these funds to retail investors.”
The Canadian regulatory environment has been relatively supportive of initial coin offerings (ICOs) and cryptocurrencies, with the first cryptocurrency fund announced last October and at least two investment companies currently applying to launch bitcoin-based ETFs.
Below: Cryptocurrency Investors Brace For Regulation Crackdown