We are "cautious short-term on bitcoin," Fundstrat co-founder Tom Lee said in a Thursday report. He said bitcoin has gained far more than fundamentals warrant right now.
Fundstrat's model for bitcoin factors in the number of unique bitcoin addresses — a string of letters and numbers used to identify accounts — and the estimated number of transactions per user. In August, the model indicated that bitcoin would rise to $6,000 by the middle of 2018.
Bitcoin shot past that figure to an all-time high of $7,454.04 on Friday, according to CoinDesk. A surge of investor interest in the digital currency has sent it soaring more than seven times in price this year.
DataTrek Research co-founder Nick Colas, a market strategist who began writing about bitcoin several years ago, also pointed out in a Friday note that digital currencies are still not an asset class by traditional criteria of size and fundamentals.
"Crypto currencies do not yet have as robust a regulatory framework around them as stocks, bond, currencies or other traditional asset classes," Colas said. "Some prominent financial markets professionals even think that governments may eventually ban them. No one talks that way about stocks and bonds."
Several major investors and banking executives have said in the past several months that bitcoin is a bubble that may soon burst. Elliott Prechter of The Elliott Wave Theorist newsletter predicted nearly seven years ago that bitcoin would surge from 6 cents. But Prechter said in July that the mania around bitcoin now dwarfs the tulip bulb mania from nearly 400 years ago.
With bitcoin just above $7,000 on Thursday, Lee said in his report that the currency is overwhelmingly in "weak hands," or held by investors who are chasing price gains and who would quickly sell on any negative turn in sentiment.
Lee maintained a 2022 target of $25,000 for bitcoin. His team's technical analysis indicates if bitcoin falls below $6,450, the lowest it will fall is $5,000, the September high. Before starting Fundstrat in 2014, Lee was chief equity strategist at JPMorgan.
The world's largest futures exchange, CME , said Tuesday that in response to client interest it plans to launch bitcoin futures by the end of the year. Amazon.com this week also registered three website domains that include references to cryptocurrencies , although the move may be more to protect the company's brand name. The e-commerce giant has said it has no plans accept cryptocurrency.
In contrast to Lee's cautious turn, stock analyst Ronnie Moas of Standpoint Research said Friday that following the latest headlines, he is raising his 2018 price target on bitcoin from $7,500 to $11,000. Moas began covering bitcoin this summer around the same time as Fundstrat and has a $50,000 target for 2027, a nearly sevenfold gain from Friday's prices.
Bitcoin has come a long way from being followed by a small group of enthusiasts to the focus of a new product from a major exchange. More than 120 so-called cryptofunds have launched to invest in bitcoin and other projects related to cryptocurrencies, according to financial research firm Autonomous Next.
Not meeting the traditional criteria of an asset class is "no reason to avoid" digital currencies, Colas said. "By the time they meet the high hurdles of 'Asset class' status, much of the high-powered return potential will be in the past."