Bitcoin again is on a spike higher, with a 22% gain last week and a 7% gain even over the weekend. And it raises the question: could this new age ‘currency’ be really heading to $US100,000 by year’s end, as some experts predict?

It comes as tech stocks have been dumped in recent weeks, with the Nasdaq top 100 group of companies down over 10% in the past three weeks and some big names like Tesla down 20%!

Over 2020, Bitcoin surged with the tech stocks. Perversely, some of the reasons why tech stock prices are now sliding explain why Bitcoin is heading into new record-high territory.

CNBC reports that “the digital currency is up 963% over the last 12 months, according to Coinbase…[and] bitcoin’s rally is driven partly by increased adoption by larger institutional investors and firms and speculative demand.”

Yep, big international corporations are taking bitcoin seriously, as the following shows:

• Tesla has purchased US$1.5 billion worth of bitcoin and will accept the digital currency as payment for its products!
• Mastercard has given some digital currencies a tick of approval and will allow some payments to be made by the likes of bitcoin.
• PayPal is making moves to accept digital currencies on its platform.
• US bank BNY Melon is also accommodating digital currencies going forward.

Acceptance of cryptocurrencies has been a big obstacle for seeing bitcoin as a real alternative to cash, but Mastercard’s view might suggest bitcoin could soon be used by others, rather than just the believers and geeks in the tech space.

"Our philosophy on cryptocurrencies is straightforward: It's about choice," Raj Dhamodharan, an executive vice president at Mastercard, wrote in a post last Wednesday. "Mastercard isn't here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants and businesses to move digital value — traditional or crypto — however they want." (CNN)

This acceptance by institutions is being used by bitcoin players as proof that the cryptocurrency is here to stay.

“Bitcoin believers argue that the current rally is fuelled by demand from institutional investors and is different than past rallies, such as when bitcoin skyrocketed to nearly $20,000 in late 2017 before losing about 80% of its value the next year,” a CNBC report explained.

Or is it a bubble?

When the bitcoin bubble burst in late 2017, its price plummeted from US$20,000 down to US$4,000. With the current price over US$60,000, could the cryptocurrency again drop to such low levels?

A stock market bust would KO the price of bitcoin but I doubt it would go as low as $4,000. But that’s only my best guess.

Bitcoin one-year

What’s intriguing is that bitcoin fell from around US$57,000 before the Coronavirus crash and slipped to only US$45,000!

Bitcoin is sometimes seen as a digital version of gold, so it’s not just bought for safety when times get scary, it also has greater speculation value because it has the blue sky potential to be increasingly accepted by big institutions.

Also, with an big economic boom expected across 2021 and 2022, with the huge stimulus programmes of global governments meeting up with an extensive vaccinations operation, big economic growth is expected to bring inflation and rising interest rates.

This has hurt tech stocks, but they’ve also lost ground as a rotation out of tech shares and others that did well during the lockdown phase of 2020 for those stocks that will do well as global economies increasingly embrace ‘old normal’ work and life practices.

Like gold, bitcoin is seen as something you buy if you worry about inflation and rising interest rates. This too explains why its price is on the rise.

So will it last or will we have a burst bubble experience?

Like all overbought assets, a big sell off will eventually happen, but I’d bet that bitcoin will never go to $4,000 again, unless regulators changed laws to make it less usable by those in the black economy and the dark web.

Would I buy bitcoin now?

If I was a thrill-seeking investor, I would. But I prefer investments that I understand. Bitcoin has too many curve balls out there that could be thrown at it.

To me, bitcoin remains one for the punters. And it’s worth saying that Bill Miller, one of the biggest investors in the cryptocurrency in his Miller Opportunity Trust, says you shouldn’t have any more than 1-2% of your portfolio in bitcoin.

Meanwhile, arguably the world greatest investor, Warren Buffett, calls bitcoin “rat poison squared”!

“Buffett has a well-known preference for stocks of corporations whose value — and cash flow — come from producing things. But cryptocurrencies don’t have real value, Buffett said in a CNBC interview in 2020,” Yahoo.com.au reports. “They don't reproduce, they can't mail you a check, they can't do anything, and what you hope is that somebody else comes along and pays you more money for them later on, but then that person's got the problem.”