Buying Bitcoin: What investors must know before purchasing cryptocurrency

Digital currency Bitcoin’s value increased seven-fold last year and some say it could go much higher, but there’s also reason to be cautious.

Bitcoin’s breathtaking rise is tipped to continue in 2021 but there are wildly differing views about where it will head beyond that.

The world’s largest cryptocurrency jumped from $US5000 to $US40,000 between March and January, and Bitcoin believers see its price surpassing $US100,000 as more mainstream investors pile in.

Others say it’s a bubble about to burst.

US entrepreneur and investor Michael Terpin, who helped launch world number two cryptocurrency Ethereum, predicts Bitcoin to rise above $US50,000 by late March and “at least $100,000 by December”.

“Some people have predicted $200,000 or $300,000 – that will be overshooting, but I’ll take it,” he said.

“There will be a correction. The higher it goes the more it falls, but it’s not going back to zero.”

Bitcoin’s value surged in 2020. Picture: Ozan Kose/AFP

Mr Terpin said Bitcoin moved in relatively predictable cycles and corrections occurred every four years – falling about 80 per cent in value. He said the next correction should come in late 2022 or 2023.

However, Harvard economist Harry Dent said Bitcoin was “the bubble of bubbles and will crash by 95 per cent next year” before an even bigger bubble leading up to 2037.

“Yes we will see a rise in 2021 but do not buy it now – the crash is imminent,” he said.

“This is going to peak between now and the end of this year … it could go to 50,000 or 100,000 or higher and then it’s going to back down to three, five, 10 and that’s when I’d be interested in buying it long term.”

Mr Terpin and Mr Dent will go head-to-head in a free virtual event, greatbitcoindebate.com, on Thursday. Both believe Bitcoin has a long-term future.

“Bitcoin and crypto, as crazy as it looks now, is the next big thing,” Mr Dent said.

He said cryptocurrencies and their blockchain technology were the “the digitisation of all financial assets and all money”.

“It’s the internet of money, finance and value. it’s tipped to be the new digital gold.”

Harvard economist Harry Dent said Bitcoin was “the bubble of bubbles and will crash by 95 per cent next year”. Picture: Supplied

US entrepreneur and investor Michael Terpin said Bitcoin moved in relatively predictable cycles and corrections occurred every four years. Picture: Supplied

Mr Terpin said large US investment funds that previously called Bitcoin a scam were now encouraging customers to put at least 1 per cent of their portfolio into it.

Bitcoin’s volatility is exhilarating for some owners but scares off many investors. Its price has fluctuated between $US30,000 and $US40,000 during most of January, and swings of 5-10 per cent a day are common.

IG.com market analyst Kyle Rodda said Bitcoin “still looks to be driven by the bulls” despite its huge rise in late 2020.

“Prices appear to be consolidating currently, with price action suggesting and upside break is building for the crypto,” he said.

AMP Capital chief economist Shane Oliver said more people were jumping on the Bitcoin bandwagon “but it remains hard to value and hard to take seriously as a currency given its extreme volatility”.

@keanemoney