How Much $100 Investment in Bitcoin A Year Ago Worth Now?
Bitcoin price managed to rise above the $5,000 mark
in trading today, fulfilling the expectations and predictions of a number of Bitcoin faithful. However, it has also led to widespread concerns that a bubble is forming that will eventually crater the portfolios of many investors. The massive rise is difficult to grasp, without considering what the value of what an investment would be had it been purchased last year.
Consider an average investor who purchased $100 of Bitcoin in September 2016 when Bitcoin was selling for $572. Had they managed to hold the currency through all the ups and downs of the last year, they would be sitting on $850 with today’s $5,000 price point. This fantastic level of value growth in a short time has led to wide speculation that Bitcoin is in a bubble. Consider Bloomberg’s analysis via Twitter:
Bubble talk
While it is clear from the chart that the Bitcoin price has skyrocketed in recent months, pundits disagree with the bubble analysis. Industry leaders who are otherwise notoriously bearish have seen substantial growth potential for Bitcoin. The argument is that Bitcoin was substantially undervalued until this recent run-up, and that the only thing that had limited its growth potential was increasing mainstream adoption.
New Satoshi Cycle?
However, as news of returns spread, adoption will certainly increase, leading to greater levels of investment and growth. This cycle of adoption and growth leading to greater adoption and growth (termed a Satoshi Cycle) may well drive prices far higher in the near term. Further, limited supply has fueled speculation of massive valuations, some topping out at $1 mln per Bitcoin. Whether these predictions prove true, the cries of bubble and the incentive to buy and hold for the respective camps will increase concurrently.
Cryptocurrency Hedge Funds Drive New Satoshi Cycles
The number of hedge funds with investments in cryptocurrencies
has jumped massively in recent months. Reports of as many as 70 new hedge funds with cryptocurrency positions has led to an investor rush. This number has continued to grow, increasing the availability for institutional-level investment in Bitcoin and other cryptocurrencies. A recent report by Quartz.com indicates that this trend is continuing, as investors seek better returns from hedge funds, as the recent returns from these funds have been lower than the indexed S&P 500.
Hedge fund = price growth
The increase in hedge fund participation has coincided with a substantial increase in Bitcoin price, edging close to $5,000 in recent trading. This jump, predicted by many industry insiders, has been led by increasing mainstream participation in Bitcoin and other cryptocurrencies. The article made it clear that the increasing investor participation will fuel greater price increase,
stating:
“It’s this wall of money that’s about to hit the markets,” says Kelly of BKCM. “That makes me think we are in the early innings of this rally.”
The move from growth to acceptance to greater growth (termed a ‘Satoshi cycle’) has led many to see Bitcoin driving to new heights in the coming year.
Chuck Reynolds
Marketing Dept
Contributor
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