Throughout 2017, the price of bitcoin whipsawed, giving traders the opportunity to make, and lose, fortunes every day. However, this hasn’t continued into 2018. Throughout much of this year, the price of the cryptocurrency has traded between $6,000 and $7,000.
As I’ve written before, this stability is a double-edged sword. On the one hand, the stability could improve its standing as a currency. But on the other hand, the lack of volatility has short-changed speculators, who are betting heavily on further price gains.
At least one of these speculators believes that this is all about to change. Michael Novogratz, the former macro hedge fund manager who’s turned into one of the biggest champions of bitcoin, has made a name for himself in the crypto asset world over the past few years. Last year, he was planning to launch the world’s largest crypto hedge fund, targeting a total fund of $500m, but scrapped the plans towards the end of the year, due to market conditions.
Today he manages Galaxy Digital, a crypto-focused merchant bank, which had nearly $300m of assets under management at the beginning of 2018. These assets are invested across the crypto landscape, and not just in cryptocurrencies. Galaxy Digital owns stakes in companies that control the plumbing of cryptocurrency markets, such as AlphaPoint, which helps institutions launch cryptocurrency exchanges and tokenise assets.
His interest in Galaxy Digital, and the bank’s broad investment portfolio, gives Novogratz and his team an unrivalled view and understanding of the crypto landscape. Right now, he believes that bitcoin is severely undervalued.
In an interview earlier this month, Novogratz claimed that the price of bitcoin could hit $9,000 before the end of 2018. “Bitcoin has to take out $6,800 and, after that, we could end the year at $8,800-$9,000,” he said.
And in 2019, he’s expecting an even better performance from the crypto asset. He estimates that bitcoin could hit highs of “$20,000 or more” next year. According to the bitcoin master, institutional buying will drive demand as institutional investors, who missed out on the last rally, rush to get in on the action this time around.
To buy or not to buy?
Could bitcoin hit $20,000 next year? Personally, I’m sceptical, but I don’t have the same view of the market as the team at Galaxy Digital — they could know something we don’t.
The biggest problem with bitcoin, in my view, is the fact that it has no underlying fundamental value. It is only worth as much as someone else is willing to pay for it.
With this being the case, if you do want to bet on its next rally, I highly recommend holding it as part of a broadly-diversified portfolio. That way you can bank the profits if it shoots to the moon, but your losses will be limited if the market implodes.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.