Bitcoin investors should be more aware of the asset's volatile history of bubbles and dramatic price crashes, crypto exchange founder Bobby Lee has said.
Lee told Insider that bitcoin's history suggests it will continue shooting up but then is likely to crash dramatically "within a few hours." He said bitcoin may rapidly lose 50% of its value and could then fall further over the coming years.
Bitcoin has soared in 2021, touching an all-time high of close to $62,000 in March, after falling below $4,000 in the same month a year earlier.
Analysts said the huge amounts of money pumped into economies by governments and central banks - which have supported asset prices across the board - have been a key driver.
Lee said bitcoin could potentially go to $300,000 in the latest bull market cycle. The cofounder of BTCC, one of the oldest crypto exchanges, said he's attracted to bitcoin as a store of value at a time when fiat currencies risk losing value due to monetary stimulus.
Yet, the entrepreneur, who has recently written a book about bitcoin, said buyers should be more aware of the digital asset's hugely volatile past.
"A lot of investors are getting in without knowing the history," he said. "That's just life, right? People buy real estate, not knowing the history of real estate bubbles, people buy stocks, not knowing about the history of stock market bubbles."
He added: "Bitcoin history has shown that not only has it risen really fast, but after every bubble, the bubble bursts, after every bull market, the bubble does burst and it quickly falls."
Lee said bitcoin could fall 50% rapidly, "and then it'll be a bear market for the next two, three years." At times, it could even fall as much as 90% from previous highs, he said.
"When bitcoin winter comes, when it crosses the 50% sell-off, that's when people lose conviction and then people panic. They sell, and that's what causes it to go down even further and sit at that low level for two or three years."
Yet, Lee said he remained optimistic about bitcoin. "We just have to have the mental fortitude to hold onto it, what they call HODL... hold on for dear life." He predicted it could even hit $1 million if it continues to go through boom-and-bust cycles.
Bitcoin continues to sharply divide the financial world, although many investors and institutions have been drawn to the cryptocurrency's remarkable rally. JPMorgan, Morgan Stanley, BlackRock, and Tesla are some of the major corporations to get involved.
However, bitcoin skeptics argue that bitcoin's massive volatility means its institutional adoption will be limited. Many argue its rise has been driven by huge amounts of stimulus and could falter once people return to normal life and spending patterns after the coronavirus pandemic.
They say it is set for a price crash similar to after 2017, when bitcoin plunged below $4,000 from about $20,000 in just over a year.