‘Incredibly volatile’: Bitcoin’s COVID boom could be doomed
Bitcoin has doubled in value since the COVID crash in March, but potential investors are being warned its future direction remains a mystery.
The cryptocurrency that captured the imagination of everyday Australians three years ago is back in the spotlight and seen by some as a safe haven investment in an uncertain world.
One of the world's most volatile investments, the price of a single Bitcoin surged from $1000 to $25,000 between late 2016 and late 2017, then tumbled back to $5000 by early last year, and is currently back above $15,000.
Many traditional investors shun it, despite the growing importance of its technology in the finance world and its stellar rise since it cost 10,000 Bitcoins to buy two pizzas a decade ago.
AMP Capital head of investment strategy Dr Shane Oliver said he was still "pretty sceptical".
"It's incredibly volatile," he said.
"If you got in when everyone was talking about it three years ago you are still a way behind," Dr Oliver said.
"It doesn't pay an income so there's no way to value it - it's just a guess."
Bitcoin is the largest of thousands of cryptocurrencies circulating today and represents about 70 per cent of the total market.
Dr Oliver said it was difficult to use for transactions - because $50 bought today might be worth much more or less within a matter of weeks. And its future price is a mystery, he said.
"You may as well throw darts at a dartboard or throw a dice."
Digital currency marketplace Binance Australia's CEO, Jeff Yew, said he expected all cryptocurrencies to continue to grow.
"Over the last two years, we have seen much more people investing in crypto and using Bitcoin," he said.
"As the world progresses more digitally, an increase in the use of cryptocurrency and digital currencies is inevitable."
Mr Yew said Bitcoin's price movements were affected by factors including global financial markets, activity by central banks and a rising number of users and investors.
"Without a crystal ball we can't forecast the future value of Bitcoin, but what I can say is that the future looks bright for cryptocurrencies in Australia," he said.
CMC Markets chief market strategist Michael McCarthy said Bitcoin had enjoyed "an extraordinary rise" since early 2019.
"The world is flooded with money looking for a home, and there's an increasing correlation between cryptocurrencies and gold - is some ways cryptocurrencies like Bitcoin are taking on a safe haven status," he said.
"As an alternative investment they are getting good support."
Mr McCarthy said digital currencies would be important in the future and Bitcoin was becoming more mainstream.
"We are seeing Bitcoin ATMs," he said.
"It's very popular with IT workers because they understand the technology. There's no doubt the technology will be important."
And his forecast for the Bitcoin price in the months ahead? "If I had a Bitcoin I would toss it for you."
Originally published as 'Incredibly volatile': Bitcoin's COVID boom could be doomed