The debate over the value of cryptocurrencies, and bitcoin in particular, continues in the financial markets as leading institutional investors debate their role in wallets.
One strategist with an optimistic view of bitcoin's value is Dhaval Joshi, lead strategist for BCA Research's Counterpoint product. He shared and answered questions from one of his skeptical customers.
Joshi & # 39; s main argument is that bitcoin
will rise as it becomes a larger share 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 a demand for an 'anti-fiat' asset that will hedge against a humiliation of the fiat money system,” he says. worries about fiat money won't go away, he added.
Bitcoin currently accounts for 10% of that anti-fiat market. “As this share doubles or triples, it arithmetically requires doubling or tripling the prices of cryptocurrencies,” he says.
While gold has an intrinsic value, bitcoin has none – it can be melted down and used in jewelry, for example – most of its value comes from its status as the dominant anti-fiat asset. The price from gold to silver
is around 70, while the inverse ratio of mined gold to silver in 2019 was 7.5. Silver and Platinum
trade more closely in line with their mining ratio.
Joshi acknowledges that bitcoin is more volatile than gold – and says that to account for the risk of larger withdrawals, investors should hold $ 1 worth of cryptocurrencies for every $ 3 worth of gold. He also says cryptocurrencies will take a share of each other, so it's important to own a diversified basket, with exposure to others, such as ethereum
That ratio of $ 1 crypto to $ 3 gold implies that cryptos should be 25% of the market. Specifically, this would bring bitcoin to $ 120,000. On Thursday, bitcoin traded hands for $ 56,720.
The rise of cryptocurrencies will also affect inflation. “With cryptocurrencies as a competing trust system, the only way for governments and central banks to maintain our trust in fiat money is not to lower its value. In other words, cryptocurrencies are the new vigilantes to avoid rampant inflation, ”he says. He also recommends underweighting gold miners as gold's anti-fiat premium is collapsing.
Also read: "We've reached a tipping point" in bitcoin acceptance, says Fidelity's Tom Jessop
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