Bitcoin- Dramatic Forecasts From Both Camps

In a January 22 article on Barchart, I wrote, “Bitcoin, Ethereum, and cryptos are recovering in early 2023, and time will tell if they blast off on the upside over the coming weeks and months. Anyone dipping a toe in the asset class should realize that the risk is a function of the potential rewards and only risk capital you are willing to lose.”

Volatility is a nightmare for passive investors, but it creates a paradise of opportunities for nimble traders with their fingers on the pulse of markets. On January 22, Bitcoin was trading at the $22,871.31 level. The price has moved lower since then, but the voices supporting and opposing the controversial asset class continue reverberating through the market. 

Cathie Wood makes a bold forecast

Cathie Wood is the founder, CEO, and CIO of Ark Invest, an investment management firm specializing in technology. 

With Bitcoin sitting around the $23,000 level in early February 2023, Cathie Wood forecasted that Bitcoin could reach $1.5 million per token in just seven years by 2030. In November 2022, when Bitcoin was near its low, she purchased $60 million in Bitcoin and cryptocurrency stocks after the FTX collapse and put her investment capital at risk. 

The Ark Innovation ETF (ARKK) tracks Cathie Wood’s performance. 

The monthly chart shows ARKK made lower lows in November and December 2022 as the cryptocurrency asset class was under pressure. ARKK recovered, making higher lows and higher highs in January and February 2023. The bottom line is Cathie Wood put her money where her mouth is, investing in Bitcoin, crypto assets, and technology innovation equities. 

Cathie Wood is not alone; other high-profile Bitcoin and cryptocurrency supporters include Elon Musk, Jack Dorsey, Anthony Scaramucci, Michael Novogratz, and the Winklevoss twins, among others. 

The Buffet-Munger camp is not shy about its opinion

In 2018, Warren Buffett called Bitcoin “rat poison squared.” After doubling down on his distaste for Bitcoin and cryptos over the subsequent years, in 2022, he said, “If you told me you owned all of the Bitcoin in the world, and you offered it to me for $25, I wouldn’t take it because what would I do with it? I would have to sell it back to you one way or another. It isn’t going to do anything.”

Mr. Buffett’s partner, Charlie Munger, has been less diplomatic about Bitcoin, recently saying the U.S. should follow in China’s footsteps and ban cryptocurrencies. In 2021, he offered his opinion on the asset class, saying, “T think I should say modestly that the whole damn development is disgusting and contrary to the interests of civilization.” Mr. Buffett and Mr. Munger have long criticized Bitcoin and other cryptos for their extreme volatility and lack of regulation. The believe it will eventually be worthless.

The head of the leading financial institution does not want to be bothered

Jamie Dimon has been the Chairman and CEO of JP Morgan Chase, the leading U.S. financial institution, since 2005. In 2017, Mr. Dimon called Bitcoin a “fraud that will eventually blow up.” In 2022, he said crypto tokens are “decentralized Ponzi schemes.” Most recently, at the World Economic Forum, in Davos, Switzerland, in January 2023, he told a CNBC reporter, “I think all that’s been a waste of time, and why you guys waste any breath on it is totally beyond me. Bitcoin itself is a hyped-up fraud; it’s a pet rock.”

Jamie Dimon distinguishes between cryptos and blockchain, stating, “That’s different. Blockchain is a technology ledger system that we use to move information. We’ve used it to do overnight repo, we’ve used it to move money, right? So that’s a technology ledger that we think will be deployable.”

Sitting and waiting for the next move- History favors the upside

The debate is likely to rage on, with the supporter’s voices growing louder when crypto prices rise. When crypto values fall, the detractor’s voices dominate the discussion. 

Price history provides an unemotional picture. Bitcoin and the volatile cryptocurrency asset class have experienced plenty of boom-and-bust price volatility since 2020. While Bitcoin fell 77.5% from November 2021 through November 2022, the plunge was less than the correction following the 2014 Mt. Gox bankruptcy that took Bitcoin 84.8% lower from November 2013 through January 2015. Bitcoin fell 84.1% from the December 2017 high to the December 2018 low. Extraordinary rallies followed those declines. Therefore, if history repeats, the recovery and rally may just be starting, and an explosive rise could be on the horizon. 

COIN and BITO are likely to move with the leading cryptocurrency 

Coinbase (COIN) is a leading cryptocurrency platform. The ProShares Bitcoin Strategy ETF product (BITO), an ETF linked to Bitcoin futures contracts, tends to move higher and lower with the leading cryptocurrency. Bitcoin rose from $15,516.63 in November 2022 to the most recent high of $24,203.30 in February 2023, a 56% increase. 

Over the same period, COIN rose from $31.55 to $87.63 per share or 177.7%. 

BITO rallied from $9.48 to $15.17 per share or 60%. Time will tell if another Bitcoin and cryptocurrency substantial rally is on the horizon. Still, the debate between the supporters and detractors will likely continue, with each side using the price action to justify their positions or opinions. 

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