Dubbed the ‘Godfather of Bitcoin’, American investor Michael Terpin has been involved in cryptocurrencies since 2013 - back when one Bitcoin was worth around US$12 (AU$15.60).
Nearly eight years ago, he co-founded a company called BitAngels, which was an investment network for blockchain technology startups. Since then, Terpin has advised over 60 per cent of all cryptocurrencies worldwide, and helped launch Ethereum, Tether and Ripple.
He’s watched Bitcoin soar to new heights this year, after bursting and losing 65 per cent of its value in 2018.
Now, he predicts Bitcoin will hit US$100,000 (AU$130,000) by the end of the year. Here’s why.
“When you’ve been around long enough, you realise that there are cycles, just like there are stock market cycles,” Terpin told Yahoo Finance.
And, like stock market cycles, you should be buying during a crash, and selling during a boom, he said.
“Cycles in Bitcoin are pretty well established, and relate to Bitcoin ‘halving events’,” he said.
“Every four years, the number of bitcoins that come onto the market - that are mined - halve. That means every four years, you end up all of a sudden having a much lower supply. And yet, demand is linear.”
And, what do you get when demand remains constant but supply falls? “Prices start gradually moving up, and then all of a sudden, people get excited, and you pass all-time highs, and people get more excited.”
That often attracts new types of investors, and eventually the market goes too high for that particular cycle, and the bubble pops.
“This isn’t like the one-time bubble of tulips in the 1600s, or railroad stocks in the 1800s - this is a continuing boom and bust cycle because that’s just the way that market works.”
What’s happening now?
The cryptocurrency market has hit the trillion-dollar mark in the last few weeks, with the Bitcoin market alone sitting at around US$700 billion.
“When I got in, it was a billion-dollar market, so 700 times that in terms of the size of the market is pretty substantial for any asset class,” Terpin said.
But what’s accelerating the market right now is the ‘Bitcoin summer’.
“You have four seasons: Bitcoin spring is when you have the halving event, so the ‘seed’ is planted for the next growth period. Bitcoin summer is the year after the halving, when you usually reach your all-time highs near the end of the year.”
Bitcoin autumn occurs when prices begin dropping away from their all-time highs, and winter is when investors begin to sell under pressure.
Bitcoin hit its first all-time high at the end of 2013, the year after the first halving. It hit its second all-time at the end of 2017 - again, a year after the halving event.
2021 marks the year after another halving event, which means the Bitcoin should, in theory, reach another all-time in December - which is exactly what Terpin predicts.
“By the end of this year, I’m projecting around $100,000, and there are certainly people out there looking for numbers higher than that, but that’s my projection.”