Bitcoin has had an incredible run since the beginning of the year. On January 1, bitcoin surpassed the $1,000 mark for the first time in three years. Fast forward to today, bitcoin is trading at over $5,500 after hitting its latest all-time high of over $5,580.
The recent rally in bitcoin, which saw the price of the digital currency surge by 25 percent in less than a week was somewhat surprising giving the mixed headlines that bitcoin has been receiving in the past couple of weeks.
Several bitcoin skeptics such as JPMorgan CEO Jamie Dimon and Hedge Fund manager Ray Dalio have recently voiced their opinions about the digital currency calling it anything from “not real” to “a bubble”. Nonetheless, the price of bitcoin stayed resilient and actually managed to make substantial gains in the past two weeks as more and more investors are pouring funds into this new digital asset class.
While skeptics do not believe in bitcoin’s future success, there is also a fair share of market experts who strongly disagree.
More Than Just a Fad
Morgan Stanley CEO James Gorman believes that bitcoin is “certainly more than just a fad”.
Speaking at a Wall Street Journal conference he said that bitcoin is “obviously highly speculative, but it’s not something that’s inherently bad. It’s a natural consequence of the whole blockchain technology.”
He added: “The concept of anonymous currency is a very interesting concept – interesting for the privacy protections it gives people, interesting because of what it says to the central banking system about controlling that.”
Goldman Sachs has also taken an interest in bitcoin due to increasing customer demand. A company spokesperson told the Wall Street Journal: “In response to client interest in digital currencies we are exploring how best to serve them in this space.”
Goldman Sachs CEO Lloyd Blankfein has not yet made up his mind about digital currency. He tweeted on October 3, “Still thinking about #Bitcoin. No conclusion – not endorsing/rejecting. Know that folks also were skeptical when paper money displaced gold.”
Having said that, it has been reported that Goldman is looking into started a digital currency trading desk to capitalize on the bitcoin gold rush. Both the firm’s currency trading and the strategic investment team are currently exploring options but no final decision has yet been made as to if or how the company would get involved in bitcoin trading. Nonetheless, it is a clear sign that Wall Street believes in the future of cryptocurrencies and sees it as an opportunity to generate high returns for itself.
Bitcoin to Hit $10,000 in 2017?
Former Fortress fund manager Michael Novogratz believes that the price of bitcoin could reach $10,000 very soon. The Wall Street heavyweight told CNBC: “It would not surprise me if, in the next six to 10 months, we’re over $10,000.”
Furthermore, Novogratz is putting his money where is mouth is and is launching a $500 million cryptocurrency hedge fund that will invest in bitcoin and other digital currencies. Reportedly, Novogratz will invest $150 million of his own money into his venture, which acts as a testament to the fund manager’s belief in this new asset class. Additional funds will come from “family offices, wealthy individuals, and fellow hedge fund managers,” according to Novogratz.
Novogratz, however, is not the only Wall Street investors who believe in the future of bitcoin. Currently, there is a wave of cryptocurrency hedge funds launching to capitalize on the potential of cryptocurrencies.
According to financial technology analytics firm Autonomous NEXT, there are over 75 digital currency-focused hedge funds in the market today with combined assets under management of $1.5 to $2 billion. Some of these funds, such as the Pantera Bitcoin Fund, invest exclusively in bitcoin, while other funds invest in a range of different digital currencies such as ether, litecoin, and ripple, as well as newly issued ICO tokens.
Steve Nadel, a hedge fund attorney, and partner at Seward & Kissel told Business Insider: “Cryptocurrencies have garnered a fair amount of interest in the investment management space, primarily because of the returns they have recently shown.”
The more institutional investor money flows into digital currencies, the more the market will rally and the most established digital currencies will be the likely recipients of the bulk of these new inflows.
While there will always be skeptics when it comes to bitcoin, the increasing interest by Wall Street in investing in bitcoin and other digital currencies is a sign that a new bitcoin price tag of $10,000 is within reach.