The debate over the value of cryptocurrencies, and Bitcoin in particular, continues in financial markets as major institutional investors debate their role in portfolios.
MarketWatch publishes the bullish view of Bitcoin’s value by Dhaval Joshi, Chief Counterpoint Product Strategist at BCA Research.
Joshi’s main argument is that Bitcoin will rise as it becomes a larger part of what he calls the $ 15 trillion ‘anti-fiat’ market, which is currently dominated by gold.
“As long as we have a fiat money system, there will be demand for an ‘anti-fiat’ asset that is a hedge against the degradation of the fiat money system,” he says. Central bank moves to introduce their own digital currencies do not alleviate fiat money concerns, adds Dhaval Joshi.
Bitcoin currently represents 10% of that ‘anti-fiat’ market, according to MarketWatch. “As this participation doubles or triples, in the same way it will require doubling or tripling the prices of cryptocurrencies”, highlights the strategist.
While gold has intrinsic value that Bitcoin does not have (it can be melted down and used in jewelry, for example), most of its value comes from its status as a dominant ‘anti-fiat’ asset. The price of gold relative to silver is approximately 70, while the inverse ratio of mined gold to silver was 7.5 in 2019. Silver and platinum trade more closely in line with their extraction ratio. , publishes MarketWatch.
Joshi acknowledges that Bitcoin is more volatile than gold and says that to account for the risk of further drawdowns, investors should have $ 1 of crypto for every $ 3 of gold. He also says that cryptocurrencies will be shared with each other, so it is important to have a diversified portfolio, with exposure to others such as Ethereum.
That ratio of $ 1 in crypto for every $ 3 in gold means crypto should make up 25% of the market. This would take Bitcoin in particular to be worth $ 120,000.
The rise of cryptocurrencies will also have implications for inflation. “With crypto as a competing trust system, the only way governments and central banks can maintain our trust in fiat money is not to degrade its value. In other words, cryptocurrencies are the new watchdogs to prevent rampant inflation, ”Joshi concludes.