Bitcoin continues to be the investment industry’s swaggering upstart, derided by some, not trusted by many but undoubtedly making its volatile mark. The swings are a reminder of its notorious volatility, with its price nevertheless having more than quadrupled over the past year. The cryptocurrency’s market capitalization of around US$575 billion would have to rise by 4.6 times to match the total private sector investment in gold via exchange-traded funds or bars and coins. The strategists, led by Nikolaos Panigirtzoglou, said this outlook depends on the volatility of Bitcoin converging with that of gold to encourage more institutional investment, a process that will take some time.
«A crowding out of gold as an ‘alternative’ currency implies big upside for Bitcoin over the long term,» the strategists said. However, «a convergence in volatilities between Bitcoin and gold is unlikely to happen quickly and is in our mind a multiyear process. This implies that the above-$146,000 theoretical Bitcoin price target should be considered as a long-term target, and thus an unsustainable price target for this year». The report said that more institutions and noted investors, from Paul Tudor Jones to Scott Minerd and Stan Druckenmiller, have either started allocating funds into Bitcoin or have said they’re open to doing so.
The bulls stress that Bitcoin offers a hedge against dollar weakness and inflation risk but the bears — and there are some strident ones — say retail investors and trend-following quant funds are pumping up an unsustainable bubble. Nick Barisheff, the founder and CEO of Bullion Management Group, told WP he doesn’t believe gold’s status as the ultimate safe haven asset is under threat. He believes it remains the most negatively correlated asset to traditional financial assets, like stocks, bonds, and even real estate. « The limitation on the creation of new cryptos is one benefit over the conventional fiat currencies but the trouble is there are hundreds of cryptocurrencies, so when you look at cryptos, you have to look at them all in combination. »
« In essence, Bitcoin is a ‘harder’ form of money than gold.»In addition, the ability for almost anyone who has a smart phone and/or inexpensive home computer in the world to be able to buy, store and use Bitcoin is superior to gold. Just try to buy gold and to verify its purity. Assaying gold is a tricky process. A Raspberry Pi — a cheap computer, under $100 — can run a full Bitcoin node and you can self-verify at home.
«He also highlighted the institutional-quality onramps that have been created over the past three years in regards to Bitcoin, with the likes of Fidelity, TD , Statestreet, BNY Mellon, JPM, Microsoft, Paypal, Visa and Mastercard all working on improving the user experience for investors. As a nascent asset class, the trend has seen higher highs and higher lows during this period. However, Salzer said volatility has been declining, albeit it remains much higher than a mature asset like gold.»
Source: James Burton | Wealth Professional
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