Bitcoin is headed higher long term, but don't chase now on Tesla buy, BTIG strategist Emanuel says

Published Tue, Feb 9 20216:59 AM ESTUpdated Tue, Feb 9 20219:21 AM EST

Patti Domm @in/patti-domm-9224884/@pattidomm

BTIG is sticking with its year-end target of $50,000 on bitcoin, as Tesla's purchase of the cryptocurrency pushed the price above the mid-$40,000 mark. "It's come a very long way in a very short amount of time, and we continue to be positive on it," said Julian Emanuel, chief equity and derivatives strategist at BTIG. He also cautions that investors should not chase gains now since the cryptocurrency is so volatile. "This is a long-term investment story," he said. "We just don't believe it makes sense for us to get more aggressive than we already were, either as strategists or for the public, investing in a new asset class." Bitcoin jumped after Tesla said Monday it bought $1.5 billion in the cryptocurrency . The digital coin surged 20% to above $46,000 on Monday , for its best day since March, according to Coin Metrics. It was adding to those gains on Tuesday morning, up another 6% to $46,573. Emanuel said crypto as an asset class makes sense since the dollar is expected to be under pressure, and government bond ownership is likely to be negative. He said he raised his target on the 10-year Treasury yield to 1.7% from 1.5% for 2021. Bond yields move opposite price. Tesla said it bought bitcoin to give it "more flexibility to further diversify and maximize returns on our cash." Tesla also said it would start using bitcoin as payment for its electric vehicles where legally possible. Tesla had $19 billion in cash and cash equivalents on hand at the end of last year, according to its latest regulatory filing. "This whole thing of strong-handed entities getting involved with crypto to us is what we expected," Emanuel said. "You saw it happen last year, whether it was hedge funds or money management institutions." Buy the dips He said investors need to beware of bitcoin's volatile nature. Emanuel said he wouldn't recommend chasing Monday's gain. "You are much better served being patient and buying dips," he said. He added that the Tesla purchase is not that surprising. "You made new highs [Monday] morning, but if you look at the prior social media dialogue, it isn't such a surprise," he said Tesla CEO Elon Musk has been credited with sending the price of cryptocurrencies higher with his activity on Twitter . "When we turn the page from 2020 to 2021, it's very clear that the dynamic of social media has changed, such that the most important voice is no longer politically oriented. It is industrialist-oriented, tech centric," Emanuel said. "But when we look at the market in January and February, it's very clear the power to move markets through social media was there, in 2020 and has been even more amplified in 2021 in the prices of asset classes like bitcoin and meme stocks," he said. Emanuel said investors should consider the potential for regulatory risk for cryptocurrencies, now that President Joe Biden has taken over and Democrats have the majority in Congress. "Given the backdrop of what we've seen in the equity market, they're likely to take their time and be very diligent about how they're going to approach cryptocurrency," he said. "Gary Gensler has proved to be an advocate for cryptocurrency is his prior academic life." Gensler is Biden's pick for Securities and Exchange Commission chairman.

A woman passes in front of a Bitcoin exchange shop.

Artur Widak | NurPhoto | Getty Images

BTIG is sticking with its year-end target of $50,000 on bitcoin, as Tesla's purchase of the cryptocurrency pushed the price above the mid-$40,000 mark.

"It's come a very long way in a very short amount of time, and we continue to be positive on it," said Julian Emanuel, chief equity and derivatives strategist at BTIG.

He also cautions that investors should not chase gains now since the cryptocurrency is so volatile.

"This is a long-term investment story," he said. "We just don't believe it makes sense for us to get more aggressive than we already were, either as strategists or for the public, investing in a new asset class."