Stocks and index ETFs have been significantly more volatile lately, thanks to fears that cryptocurrencies could be swiftly devalued, amid regulatory uneasiness from China. But at least one financial pundit sees Bitcoin moving higher, which could potentially lift other cryptocurrencies as well.
In a recent interview with CNBC this week, strategist Tom Lee expressed optimism that Bitcoin still has a ways to go before the end of 2021, and that the notorious crypto’s plummet last week has not deterred his projections for a $100,000 per token year-end price target.
“I think bitcoin is hyper volatile. That’s the nature of it, but that’s what creates the reward for people,” Lee said in an interview on “TechCheck.”
Lee’s projection for six figure Bitcoin was first presented late last year, and he remains confident in his projection, even as the world’s largest cryptocurrency has faltered since notching an all-time high near $65,000 in mid-April.
The Drop
Cryptocurrencies, including Bitcoin, fell precipitously as investors fled the market last week. The notorious crypto tumbled 30% at its low of the session, to just above $30,000, according to Coin Metrics, and has been sliced in half since notching an all-time high above $64,000 in mid-April. It is rumored that China’s warning to financial institutions not to conduct crypto-related business may have contributed to the rapid decline.
On May 18 a statement posted on the Chinese Banking Association’s website noted that financial institutions should “resolutely refrain” from offering services that utilize digital currencies, because they are simply too volatile.
But China isn’t the only country expressing concern over cryptocurrencies. A number of financial institutions in the Middle East are also prevented from dealing in Bitcoin, and U.S. regulators continue to express interest in actively monitoring cryptocurrencies. On Thursday, the Treasury Department said it would require businesses to report any Bitcoin payment over $10,000, in a supposed effort to curb tax evasion.
Bitcoin wasn’t the only cryptocurrency affected on Wednesday. Ether, the digital currency that powers the Ethereum blockchain, lost more than 20%, at $2,699, according to Coin Metrics. Dogecoin also lost over 18%.
Stocks invested in the crypto market also lost market share Wednesday. Tesla, a major holder and proponent of Bitcoin, shed 4%. MicroStrategy, which also had significant Bitcoin holdings in its corporate treasury, tumbled 10%. Meanwhile, Coinbase plummeted almost 10%.
“There is no question that bitcoin has been the poster child for rampant market speculation and risk appetite,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “Thus, it should be absolutely monitored in gauging the pulse of risk taking, and now risk aversion.”
The moves in Tesla also hurt funds like the Simplify Volt Pop Culture Disruption ETF (VCAR), and the well-known Ark Innovation ETF (ARKK), which dropped more than 4%.
“This was bound to happen at some point in ’21 and a somewhat of a reset in crypto-pricing is likely more healthy vs negative for the broader equity markets over time,” Jordan Klein, an analyst at Barclays, said in a note.
Recouping Some Losses
But despite its moves lower last week, the rally in the volatile cryptocurrency resumed on Monday, with Bitcoin gaining roughly 12% to trade above $37,000.
While Lee is supportive of a move higher, he still reminded investors to be mindful of Bitcoin’s notorious volatility.
“Bitcoin volatility is sort of systematic to the network itself, so I think anybody who buys bitcoin has to be aware it’s always going to be hyper-volatile. That’s the opportunity and that’s why people call it ‘diamond hands’,” Lee said.
Lee also noted that the recent tumble in the notorious crypto may have come from impatient late-comers, who are trying to jump on Bitcoin at its highs, without waiting for a pullback.
“This is essentially a bit of a wake-up call” for investors who got into bitcoin when it was on a big run higher, Lee said. “When you look at where the selling is taking place, it’s not from the original holders of bitcoin, but it’s a lot of new accounts.”
Meanwhile, as the ongoing push for s Bitcoin ETF continue, analysts are expressing skepticism.
Eric Balchunas, senior ETF analyst for Bloomberg, tweeted recently that “2021 isn’t dead yet, but it just took a nasty blow to the head.”
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