The value of a single Bitcoin crossed US$40,000 or CA$50,000 yesterday. In January last year, it was worth just CA$12,700. That’s a stunning 300% rally in just 12 months.
If you’re an early adopter with BTC in your portfolio, congratulations. But if you’re considering adding exposure now or looking for reasons to hold on, here’s what you need to know about Bitcoin’s prospects in 2021.
Historic pattern
For investors who’ve been in the cryptocurrency space for a while, Bitcoin’s boom-and-bust cycles should be unsurprising. Back in 2017, the value of the token surged 20-fold in fewer than 12 months. Then it spent the next year losing 83% of its value. Previous cycles have been just as dramatic.
Put simply, BTC has a clear pattern of frenzied highs and dramatic downfalls that play out rapidly. But one thing remains consistent: growing volume. Every new cycle is larger than the previous one, as more people become aware of the sector and adopt the technology.
That’s what makes me optimistic that BTC could breach $100,000 this cycle — possibly within the next few months. For investors with some spare cash, there’s still room to get involved.
How to invest in Bitcoin
Fortunately for Canadian investors, there are three different ways to bet on the Bitcoin bull cycle this year. The most obvious option is to buy the digital currency directly. Mainstream trading and payments platforms could allow you to buy BTC in Canadian dollars and hold it in a digital wallet.
However, holding BTC requires some technical skills. Also, the Canada Revenue Agency (CRA) isn’t entirely clear about the way these digital tokens are treated for tax purposes. That makes holding BTC complicated for most investors.
Buying an exchange-traded fund (ETF) could be much more convenient. The Bitcoin Fund (TSX: QBTC.U), for instance, tracks the performance of this digital currency and can be held in your portfolio like any other stock or ETF. In fact, it could also qualify for your Tax-Free Savings Account (TFSA).
The fund has delivered a 362% return over the past year. That’s slightly better than BTC itself, because investors have easier access to the fund. If Bitcoin breaches the $100,000 price target I expect this year, this fund could reflect that gain or potentially surpass it.
Another option is crypto mining stock HIVE Blockchain Technologies (TSXV:HIVE). HIVE stock is up 2,375% over the past year, blowing the rest of the industry away. That performance is driven by the fact that HIVE’s business model becomes more profitable when the underlying cryptocurrency surges in value.
Of course, HIVE also qualifies for your TFSA just like any other stock. That’s a good reason to keep this stock on your watch list for now.
Bottom line
Bitcoin is surging past record highs. There’s still plenty more room for it to expand. Adding exposure today could be a good idea. Consider an ETF or mining stock like HIVE Blockchain Tech.
