In a recent blogpost on their personal blog Winklevoss Capital, Tyler Winklevoss, half of the famous brother duo of crypto billionaires, has argued that Bitcoin’s potential for being a safe haven to store value might help it cross the half-million mark per coin.
As he notes, finite resources have been used in history as impervious to the inevitable inflation of fiat currencies. Gold and oil, for example, keep value and the inability of a central government to suddenly decide to flood the market by increasing the overall supply of these finite goods ensure that they will keep being impervious to great rates of inflation.
As Fed Chair Jerome Powell finished his speech on thursday, many investors were surprised by his declaration that the Federal Reserve in these uniquely troubled economic times will allow inflation to rise above 2%.
For a long time, the US dollar had been considered around the world as a safe place to store money. People from Europe, Asia or Latin America relied on the American currency. However, it seems more likely than ever that the dollar isn’t as solid and safe as it once was.
Even before COVID-19, and despite the longest bull run in U.S. economic history, the government was spending money like a drunken sailor, cutting taxes like Crazy Eddie, and printing money like a banana republic.Tyler Winklevoss, August 27, 2020
In the Congressional Budget Projections, the US has been predicted to run a $3.7 trillion deficit in 2020 which will increase the debt to GDP ratio of the US to dangerous levels. Once the Federal Reserve starts ‘buying out’ the debt of the Treasury using money it printed, the results might be increased inflation and a loss of value for the dollar.
On the other hand, the dollar is certainly not alone in this problem and many fiat currencies might follow a very similar path in the coming months, reducing their values as well. However, gold will not do that. Oil will not do that. And Bitcoin will certainly not do that.
Due to the unique characteristics of Bitcoin, it seems poised to overtake gold as the de facto value storing currency. As Winklevoss writes, Bitcoin is better at being gold than gold is. Amongst the advantages, Bitcoin has a fixed supply, not a scarce one, it’s much easier to access, exchange, more secure, digitally available, easy to store and very hard to counterfeit.
The only advantage of gold this image shows might not really be an advantage. Yes, gold still had a market capitalization around 50 times larger than Bitcoin. However; this could be seen simply as Bitcoin being thoroughly undervalued by the general public seeing as it seems better than gold in so many ways.
The Winklevoss brothers argue that the ‘bull case scenario’ for Bitcoin is a 4,500% increase which would bring Bitcoin around 500,000$. While they did not give a specific timeframe, their analysis seems to predict that this should be reached in a future not so distant. Factors such as establishment adoption might speed up this process impressively.