Bitcoin: Why $50,000 Is More Likely Than $5,000 Right Now

Looking for other high-quality, high-return investments? Check these out…

| More on:
Big Bitcoin logo.

Image source: Getty Images

Oh boy, here we go again.

Bitcoin mania takes a hold, again

Bitcoin prices have once again shot through the roof. Institutional investors are clamouring for more, accelerating asset price appreciation. Accordingly, the price of a single Bitcoin just breached a psychological barrier: $30,000.

Euphoria is driving the price action of nearly every asset class today. The fear-greed index has entered the “extreme greed” range, only a few months after being on the “extreme fear” side of the spectrum.

How are investors getting exposure to Bitcoin?

One investing vehicle utilized by some investors to gain exposure to Bitcoin has been The Bitcoin Fund (TSX:QBTC). As fellow Fool contributor Andrew Button highlighted in his recent piece, this fund is simply a holding vehicle for Bitcoin. In fact, this ETF is similar to other gold ETFs hold physical bouillon, such as iShares Gold Bouillon ETF.

One is always able to buy individual Bitcoins through exchanges or other intermediaries, but with this comes some level of risk. Investors should read and understand all the risks associated with their investments before jumping in. This is certainly the case with cryptocurrencies, which are difficult to understand.

As mentioned by Mr. Button, the fund does have a substantial fee of nearly 2%, so investors should take this into consideration.

Momentum is on the side of Bitcoin right now

The momentum trade is alive and well, and Bitcoin certainly falls into the momentum trade category right now. Following a stock or any investment higher in recent years has turned out well for investors. Following on the coattails of others and riding the hot streak of these investments has proved to be a winning strategy.

With so much momentum behind Bitcoin and cryptocurrencies in general, I think the $50,000 mark will be surpassed soon. Bubbles are only defined after they pop, so it’s entirely possible that cryptocurrencies have a lot more room to run.

That said, there are significant risks with investing in such asset classes right now.

Now is the time to be cautious

We saw what happened the last time cryptocurrencies imploded. In fact, this is a recurring theme among these assets. Rapid increases in price followed by sharp corrections define the volatility of cryptocurrencies. One certainly needs a stomach for these investments. As such, risk-adverse investors ought to watch their heart rates if jumping in at any given time.

Conservative long-term investors, in my opinion, should stay away from Bitcoin and all cryptocurrency variants right now. The rampant volatility and uncertainty that may be on the horizon make these investments potentially lucrative, but also dangerous.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned.

More on Investing

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.

3 TSX Stocks I’d Buy This Week

Are you struggling to find stocks to add to your portfolio this week? Here are my three top picks!

Read more »

Target. Stand out from the crowd
Dividend Stocks

3 Oversold Stocks to Buy for Passive Income

These three oversold stocks aren't just great right now for high passive income, but provide exposure to high-growth industries.

Read more »


3 Stocks to Hold in Your TFSA for Easy Tax-Free Income

Telco stocks like BCE Inc (TSX:BCE) offer high dividend income -- especially when held in a TFSA!

Read more »

Hand arranging wood block stacking as step stair with arrow up.

Why Shawcor (TSX:SCL) Stock Jumped 9% in September

Shawcor Ltd. (TSX:SCL) stock has rallied off big gains after announcing that big changes may be ahead over the next…

Read more »

Mature financial advisor showing report to young couple for their investment
Bank Stocks

Retire Young: How to Turn a TFSA or RRSP Into $1 Million

Here’s how you can turn your TSFA or RRSP into $1 million or more to plan your early retirement.

Read more »

A person holds a small glass jar of marijuana.
Cannabis Stocks

Cannabis Stocks Jump: What Investors Need to Know

Cannabis stocks have started to recover in recent weeks, showing there might be signs that now is the time to…

Read more »

money cash dividends
Dividend Stocks

TFSA Passive Income: Invest $30,000 to Earn $500,000 + $7,800 in Tax-Free Dividends

Make the power of compounding work for you and turn a $30,000 investment into $500,000 in the next 20 years.

Read more »

Online shopping
Tech Stocks

Why Shopify Stock and Other Tech Stocks Jumped on Tuesday

Shopify (TSX:SHOP) stock and others started climbing on Oct. 4, but will the rise continue or fall back?

Read more »