Bitcoin expected to rise by 22% in 2019

Prices of bitcoin have doubled this year, having risen some 50 per cent this month alone. Photo / 123RF

Bitcoin is expected to rise by 22 per cent from current levels by the end of the year as the launch of new services widen the appeal of the cryptocurrency and investors divert capital amid a slump in stock markets worldwide, a survey of fintech specialists has found.

Prices of bitcoin have doubled this year, having risen some 50 per cent this month alone. The cryptocurrency was trading at US$7,972.99 ($12,263.53) on Tuesday.

The Hang Seng Index and the Shanghai Composite Index meanwhile have slumped from their highs in April, as market sentiment has weakened because of the rising tensions in the US-China trade war that do not show any signs of easing up. They are up 7.01 per cent and 16.52 per cent year to date.

Executives at cryptocurrency hedge funds Arca, BitBull Capital and academics who were surveyed for the poll by the US comparison platform, forecast that bitcoin will slightly pull back from the US$8,000 level going into June before trending upwards to end the year at US$9,659.

"Eight out of 10 panellists think the price of bitcoin increased due to cryptocurrency-related announcements made at Consensus 2019 in New York City," Finder said in a statement on Friday.

Consensus, which ended last week, is one of the biggest industry events that brings together major companies, developers and investors in cryptocurrency and blockchain.

The bitcoin futures exchange Bakkt announced that it was moving ahead with plans to launch its physically-settled bitcoin futures products, which would see traders paid out in bitcoin contracts unlike those that are offered currently by the CME, which are cash settled.

Half of those polled said that it was likely that some stock investors had diverted capital into cryptocurrencies from equities because of the escalation in the US-China trade war.

David Wills, managing director at Kenetic Capital, a digital asset proprietary trading firm, said that with leading retailers such as the Amazon-owned Whole Foods, and Nordstrom, allowing consumers to pay for daily necessities with cryptocurrencies, is a potential tipping point for wider adoption of bitcoin as a transaction currency.

"Last year, the bear market was in part caused by the fallout from many loss-making, unsuccessful initial coin offerings, and the participation by a number of questionable players that attracted regulatory scrutiny in cryptocurrencies," said Wills.

He added that cryptocurrency as an investible asset class has matured a bit more this year as the focus has been on increasing institutional market participants and developing different infrastructures to cater to these institutions.

Mark Pimentel, founder and co-chief executive at Kronos, a high frequency cryptocurrency trading firm, said the recent his firm's trading strategies have used bitcoin's price swings to make substantial gains over the last two months.

"The cryptocurrency market is swayed by news and attention, so as bitcoin begins to rise in price again, more traders enter the market. It is much more likely for these entrants to buy bitcoin than sell so this predictably creates price appreciation," he said.

And unlike the more conservative forecasts, Pimentel expects bitcoin to cross US$20,000 by the year end - a level it has not reached before.

Bitcoin's all-time high is US$19,870, reached on December 14, 2017, data from CryptoCompare shows.

- South China Morning Post