The debate over the value of cryptocurrencies, and in particular bitcoin, continues in the financial markets as leading institutional investors debate its role in portfolios.
One strategist who is optimistic about the value of bitcoin is Dhaval Joshi, chief strategist for BCA Research’s Counterpoint product. He shared questions from one of his skeptical customers and answered them.
Joshi’s main argument is bitcoin
will increase as it becomes a larger share of what he calls the $ 15 trillion anti-fiat market, currently dominated by gold.
As long as we have a fiat money system, there will be a need for a ‘against fiat money’ asset to counter the weakening of the fiat money system, he said. He added that the central banks’ moves to introduce their own digital currencies do not alleviate concerns about fiat currencies.
Bitcoin currently accounts for 10% of the anti-fiat market. “When this rate doubles or triples, arithmetic it requires a cryptocurrency price to double or triple,” he said.
While gold has intrinsic value, bitcoin does not – for example, it can be melted down and used as jewelry – much of its value comes from its status as the predominant anti-fiat asset. . Price of gold to silver
is around 70, while the inverse ratio of gold mined to silver is 7.5 in 2019. Silver and platinum
Tighter transactions in accordance with their mining rate.
Joshi admits that bitcoin is more volatile than gold – and says that, to tackle the risk of more withdrawals, investors should keep $ 1 in cryptocurrency for every $ 3 in gold. He also said that cryptocurrencies will share each other, so it is important to own a diversified basket, with exposure to others like ethereum.
The ratio of $ 1 cryptocurrency to $ 3 gold implies that cryptocurrencies should make up 25% of the market. This will take bitcoin specifically up to $ 120,000. On Thursday, bitcoin was traded at $ 56,720.
The rise of cryptocurrencies will also have an impact on inflation. “With cryptocurrency as a competitive fiduciary system, the only way for governments and central banks to maintain our trust in fiat money is not to devalue it. In other words, cryptocurrencies are the new vigilance measure to prevent rampant inflation, ”he said. He also recommended that gold miners reduce weight as gold’s anti-fiat premium drops.