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“I have seen Bitcoin go up 10X, 20X, 30X in a year. So going up 5X is not a big deal.”

Estes predicts Bitcoin could hit between US$100,000 and US$288,000 by end-2021, based on a model that utilizes the stock-to-flow ratio measuring the scarcity of commodities like gold. That model, he said, has a 94 per cent correlation with the price of Bitcoin.

Citi technical analyst Tom Fitzpatrick said in a note last week that Bitcoin could climb as high as US$318,000 by the end of next year, citing its limited supply, ease of movement across borders, and opaque ownership.

Any hedge fund model on Bitcoin is rubbish. You can't model a mania

Those numbers though are a head-scratcher for Toronto-based Kevin Muir, an independent proprietary trader.

“Any hedge fund model on Bitcoin is rubbish. You can’t model a mania,” Muir said. “Is it plausible? For sure. It’s a mania. But does anyone actually have a clue? Not a chance.”

DEARTH OF SUPPLY

Bitcoin relies on so-called “mining” computers that validate blocks of transactions by competing to solve mathematical puzzles every 10 minutes. The first to solve the puzzle and clear the transaction is rewarded new bitcoins.

Its technology was designed to cut the reward for miners in half every four years, a move meant to curb inflation. In May, bitcoin went through a third “halving,” which reduced the rate at which new coins are created, restricting supply.

That halving has kickstarted Bitcoin’s renewed ascent.

Square’s Cash App and PayPal, which recently launched a crypto service to its more than 300 million users, have been scooping up all new bitcoins, hedge fund Pantera Capital said in its letter to investors on Friday. That has caused a Bitcoin shortage and has driven the rally in the last few weeks.