By Paul R. La Monica
Bitcoin has more than doubled in 2024. No other major asset class comes close to matching its performance. Companies with ties to cryptocurrencies, such as software firm and Bitcoin holder MicroStrategy and brokerage firms Coinbase and Robinhood are top stocks this year. But even though Bitcoin has pulled back in recent days, it is still near a record high and approaching the $100,000 threshold. Should investors continue to chase it?
Probably? Maybe? It's often tough to recommend something that has already gone up so dramatically. Crypto bulls need to realize that Bitcoin prices may continue to experience wild price fluctuations. But at the same time, there is no denying that the near-term outlook looks brighter following the election.
"You need to understand Bitcoin will be volatile over short-term periods. That's not going to change. But over the long run, the risk reward is still very attractive," said Damon Polistina, director of research at Eaglebrook, a crypto investment platform. "You just want to be able to sleep at night. And you should own it for years," he said.
But the next few years do look promising. President-elect Donald Trump has nominated Scott Bessent, who has crypto-friendly views, to be Treasury Secretary. And if you believe in addition by subtraction, the fact that Securities and Exchange Commissioner Gary Gensler, long viewed as a foe to the digital assets industry, has announced he will be stepping down on Inauguration Day is encouraging. Trump likely will replace him with someone with a more positive stance toward Bitcoin.
"With Trump as the president-elect, regulatory headwinds are turning into tailwinds for the first time," said Matthew Sigel, head of digital assets research at VanEck, which runs the VanEck Bitcoin Trust exchange-traded fund.
Sigel acknowledged that demand for Bitcoin is surging. But he still doesn't see signs of a bubble just yet. VanEck's target price for Bitcoin is $180,000, nearly double current levels.
"Investor interest is rising rapidly; we are receiving inbound calls at an accelerating pace as many investors find themselves under-allocated to the asset class," he wrote, adding that "while we remain vigilant for signs of overheating...a number of key indicators we track continue to signal green for this rally."
That should be great news for Bitcoin as well as the public companies in the crypto ecosystem. With that in mind, Oppenheimer analyst Owen Lau boosted his price target on Coinbase Monday to $358 a share from $265. The new target is 15% above Coinbase's current price.
"We expect enforcement actions against the industry will substantially reduce. More importantly, Congress will likely work together to create and pass forward-looking crypto bills," Lau wrote in a report, adding that the political changes in Washington "could represent a seismic regime shift" for Bitcoin.
Bitcoin may need to digest some of its recent gains, according to Katie Stockton, founding and managing partner of Fairlead Strategies. Stockton said in an email to Barron's that "the $100K level holds psychological significance as a (very) round number, and sometimes that means that it acts as resistance."
But she added that it may just serve as "a natural place for Bitcoin to take pause and digest its gains before the next upleg" and that "the breakout from last month has bullish long-term implications."
It also helps that even as Bitcoin's price climbs higher and higher, average investors needn't necessarily be scared by that fact. It isn't as if you need $100,000 to invest in Bitcoin. Coinbase, Robinhood and other brokerages allow investors to buy fractional stakes in Bitcoin, much in the same way that investors can buy smaller bite-sized portions of high-price stocks.
There also has been an explosion of less costly spot Bitcoin ETFs that invest directly in Bitcoin and whose prices largely mirror the spike in the cryptocurrency's price itself.
The largest such ETF, the iShares Bitcoin Trust ETF, is up 105% since it launched in early January but trades for only about $54 a share. Two other large spot Bitcoin ETFs, the Grayscale Bitcoin Trust ETF and Fidelity Wise Origin Bitcoin Fund, have also more than doubled this year and trade for only about $76 and $83 a share, respectively.
Still, even many Bitcoin bulls acknowledge that investors should be careful and not go overboard with their crypto investments. Eaglebrook's Polistina told Barron's that investors should have only about 1% to 5% of their long-term portfolio in crypto.
After all, Bitcoin is often referred to as "digital gold." And similar to gold, it makes sense for most investors to just have a tiny allocation of a more diversified portfolio in Bitcoin.
Write to Paul R. La Monica at paul.lamonica@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 26, 2024 00:30 ET (05:30 GMT)
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