Ship part

These silver experts see crypto as a sinking ship – do they have a point?

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Bitcoin’s exciting and volatile rise has been the investment story of the past decade. While cryptocurrency has made it clear that this is not a passing fad, no one is sure if it will ever truly compete with traditional currency, but that might not matter. Many experts believe that the real value of cryptocurrency lies in its potential as an asset rather than its acceptance as a medium of exchange.

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With so many unknowns, bulls can make a strong case

If you are bullish on Bitcoin, you are in good company with many credible pundits who believe early crypto users are on the ground floor of a real revolution.

“In my professional opinion, cryptocurrency has nowhere to go but to the top,” said Thomas Bayles, Managing Partner of Urban growth properties and the digital asset fund Iron chest. “The Internet’s population is currently 4.6 billion users and there are 2.2 billion credit card users. Of this population, only 77 million have a crypto wallet, which means we will see exponential growth and demand as more and more people begin to understand and embrace cryptocurrency around the world. .

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But the bears too

The ever-growing number of mainstream businesses that accept digital currency is undeniable, but the success of a currency doesn’t just depend on whether or not you can use it to pay rent or buy a snow shovel from Home Depot. What Bitcoin cannot do is wield the divine power of central banks that control the world’s fiat currencies.

“By regulating its supply through monetary policy maneuvers, central banks can inject or suck liquidity out of the economy,” said Kunal Sawhney, CEO of Kalkine Group, an independent equity research firm. “During inflation, these institutions raise borrowing rates and stop selling bonds, all denominated in USD. And with the decline in GDP, they cut rates and sold bonds. Simple and sharp, none of this can be done with blockchain-based digital currencies.

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The Store of Value Perspective: Crypto as a Gold Killer

At one time, people used gold to buy and sell things. Then they used official currencies backed by gold. Today, gold plays no role in what we think of as silver, but it is still an important and oldest commodity and the best store of value asset.

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Likewise, it doesn’t matter that Bitcoin ultimately replaces the dollar as a means of purchase, in the same way that dollars replaced gold. What is much more likely, at least in the short term, is that Bitcoin could replace gold as the world’s preferred store of value. Like gold and unlike the dollar, after all, Bitcoin’s supply is limited and predetermined.

“Bitcoin’s pre-programmed scarcity ensures that the coin can serve as a feasible – if not overtly volatile – store of wealth to compete with gold,” said Maxim Manturov, head of investment research at Freedom Finance Europe, a subdivision of a Nasdaq-. traded Freedom Holding Corp.

Andrew Lokenauth, an investment and banking professional who has held senior positions at Goldman Sachs, AIG and other large institutions, agrees.

“Bitcoin is deflationary in nature,” Lokenauth said. “There are only 21 million pieces. Due to its deflationary nature, Bitcoin evolves like a store of value like gold. It is already considered by many to be “digital gold”. If Bitcoin took the market cap of gold, that would mean a BTC price of $ 628,607.

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If Bitcoin Conquers Gold, It Can Conquer The Dollar

Lokenauth said Bitcoin is already 10.13% of the way to exceed the market cap of gold. If this march continues, cryptocurrency could become both the world’s new store of value and its new currency.

“It is assumed that Bitcoin will consume the $ 10,000 billion gold market cap over the decade,” said Keegan Francis, crypto editor and expert with Searcher. “After such a period, Bitcoin will have reached new levels of stability and proliferation as money. This level of distribution will put Bitcoin on the path to replacing the U.S. dollar as the global reserve currency, potentially giving Bitcoin a market cap of tens of billions of dollars. “

Some, however, are not convinced that Bitcoin even sits in the same stadium as the most famous and coveted metal in the history of the times.

“Although increasingly recognized as an asset class, Bitcoin has nothing to offer like gold as a store of value,” Sawhney said. “Yes, people have been speculating on the price of the yellow metal for ages, but remember that gold is a tangible commodity and that there is no complex consensus mechanism or computer code behind it. tend his creation. The gold supply is limited to its world reserves. But can someone guarantee that Bitcoin’s supply will not increase in the future above the threshold claimed now? “

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Nature-made pieces of metal have passed through the ages for a reason

Shidan Gouran is the founder of Pearl of the Gulf, a Canadian merchant bank – and he was also an early blockchain investor.

As such, he admits he is “very optimistic and [has] been over the past decade. But he’s also aware of the limitations that come with complexity – and cryptocurrency is very complex. In times of trouble, people like to feel the reassuring weight of a gold bar.

“Cryptocurrencies are not physical goods, they are social contracts,” Gouran said. “These are also labor-intensive and energy-intensive processes, and if the process stops, they cease to exist. It is very reasonable, for example, to consider an eternal gold bar. It can presumably outlive mankind without requiring effort and energy to maintain it. A cryptocurrency network, on the other hand, like any other complicated process, is much more likely to end and there are many ways to do it. Ultimately, you have to continually make efforts to keep a cryptocurrency network alive. Cryptocurrency networks can be forked, copied, enhanced, or better marketed. This is why these are all very risky investments. There is no real divide around them.

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About the Author

Andrew Lisa has been writing professionally since 2001. Award winning writer Andrew was once one of the youngest nationally distributed columnists for the nation’s largest newspaper union, the Gannett News Service. He worked as the business editor for amNewYork, the most circulated newspaper in Manhattan, and as the editor for TheStreet.com, a financial publication at the heart of the Wall Street investor community in New York.