Bitcoin is more likely to go up before it comes down, says expert Dean Fergie of Cyan Investment Management.

Where are we on the hype cycle for Bitcoin and how much longer can it last?

It is hard to pinpoint exactly where we are in the cycle at the moment because it has already gone longer and harder than anyone really thought it was going to go.

When you evaluate a stock you can look at the underlying fundamentals. But with Bitcoin there is no specific inherent value so it is completely esoteric.

In these type of markets, all you can do is pick which way the trend is going. But there is no doubt that today if I was given the choice, I think it would be more likely to rise to $US15,000 than to crash out at $US2500.

The thing to remember is the trend is your friend until its the end – people to date have not done well betting against the upward movements in Bitcoin price but there will be a point at which it all crashes down.

Coul Bitcoin be the digital currency of the future?

While it might at the top of the public conscience now, I am not entirely sure the payment itself will become mainstream in the near future. There aren’t many governments that have a great interest in it becoming a default currency so I think it will take a while before it is broadly accepted.

It is like the Dutch tulip mania of the 1600s, what was known as the madness of crowds. People became so obsessed with tulip bulbs that they were selling them for tens of thousands of dollars per bulb. Everyone got in on the hype and were making upwards of five times their salary selling bulbs.

But then it crashed. It became the example for how something of no real value could gain a lot and very quickly because of the sentiment at the time.

Bitcoin hit a record $US6100 last weekend. Source:
Bitcoin hit a record $US6100 last weekend. Source:

What signals should we be looking out for before a Bitcoin crash?

What I have noticed already with Bitcoin is that I have people outside of the investment industry asking me about it, be that at the footy or down at the pub. It is now something that has become common knowledge and I think that is a sign of it getting over-hyped.

Generally when tech stocks become so mainstream that you are seeing them all over the newspaper or on morning TV that is a good indication that you should be getting out. At the end of the day prices are driven by buyers and sellers and as more buyers come in they will be natural sellers at the first hint of a downturn.

The interesting thing is there have been a couple of potential pricks to burst the Bitcoin bubble that have had little to no effect on prices. About two years ago the Bitcoin exchange was hacked and more recently China halted transfers but the wounds of both events healed within a matter of days.

How attractive are stocks with exposure to cryptocurrencies?

I think there are a lot of businesses jumping in on the hype — the same as we have seen with medical marijuana.

I wouldn’t be backing a company that was being leveraged directly to the ongoing hype of Bitcoin like Digital X (ASX:DCC) or Stargroup (ASX:STL).

But there really are not many ways to play it on the ASX at the moment.


Dean Fergie is the Director and Portfolio Manager for Cyan Investment Management.

Dean has more than 25 years experience in the funds management industry covering all major asset classes. Over the past 15 years he has specialised in small cap industrial ASX listed companies. He holds formal qualifications including Master of Applied Finance and Bachelor of Engineering (Civil). Dean has lectured for the Securities Institute of Australia and is a Graduate of the Australian Institute of Company Directors.