Needham & Company, LLC, an investment banking and asset management firm, just bumped the estimated value of bitcoin from $655 to $848, due to faster than expected adoption and improving fundamentals, according to Money Morning.
The new estimate, an analysis of the Bitcoin Investment Trust (BIT), follows Needham’s original bitcoin price prediction in March.
Spencer Bogart, the author of the September 22 report, said the revised estimate is based on a faster-than-expected adoption and improving fundamentals. In addition, planned improvements to the bitcoin protocol also bodes well for bitcoin price.
Bogart continues to see bitcoin as a payment network enabling an open, global, permissionless financial system. He called bitcoin a “digital gold.”
Needham’s March 29 price prediction proved timely.
The cryptocurrency’s price was about $415. On June 11, the price breached $600. The next day it hit $675, exceeding the $655 estimate.
The price continued to surge, peaking at around $775. It retreated after that, but traded in the $650 range until the Bitfinex security breach in early August.
Nearly $65 million worth of bitcoin was stolen from Bitfinex customers, sending the price back to $550. It rebounded to $600, where it has since remained.
Needham was impressed at how fast the price rebounded following the Bitfinex hack, noting the recovery was at least in part due to improved confidence in bitcoin’s future.
Needham is positive for bitcoin price, both in the short-term and its long-term.
The outlook is based on three observations: 1) it is increasingly behaving like other investment classes; 2) adoption is accelerating; 3) changes to the software will make bitcoin more useful.
Bitcoin’s high volatility and limited liquidity have been changing. Bogart noted bitcoin’s daily volatility has become comparable to small-cap equities.
Bitcoin’s volatility is about 3.3%, while the Standard & Poor’s Small Cap 600 is 2.6%. Some oil prices and tech stocks are slightly more volatile than bitcoin.
As for liquidity, Bogart noted bitcoin’s daily dollar volume roughly resembles a U.S. mid-cap security, just using the top five bitcoin exchanges where it can trade for U.S. dollars.
Liquidity, the ability to buy and sell an investment as needed, is a key consideration. Bogart noted investing in bitcoin has advantages in this area since bitcoin exchanges are open 24/7.
Another appealing feature is bitcoin’s price moves have virtually no correlation with other investments. That allows it to serve an investing hedge to protect against sudden price drops in other asset classes.
As for adoption, Bogart notes that transaction volume has posted a compound annual growth rate of 224% since January of 2013, having more than tripled in the past year. The acceleration in transaction volume was a key reason Needham raised its bitcoin price prediction.
Needham noted bitcoin’s growing appeal in emerging markets. The cryptocurrency offers desirable features to these populations, such as fast and easy cross-border transactions and a refuge from unreliable domestic currencies, as in Venezuela.
Needham also saw promise in new bitcoin technologies. Because it is software, bitcoin’s code can be improved and updated to address problems and add new capabilities.
Bogart noted a number developments throughout the bitcoin ecosystem in the next three to seven months which could strengthen bitcoin’s features and functionality that could increase bitcoin’s demand.
Also read: Investment firm pegs BTC value at $655
In March, Needham predicted bitcoin’s price will reach $1,896 by 2020. The new report raises the estimate to $2,231 – a 272% increase over the current price.
Bogart said the short and intermediate outlook for bitcoin is the most exciting bitcoin has seen.
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