on the crypto
Tyler and Cameron Winklevoss, well-known internet entrepreneurs and crypto billionaires, argue that the weakness of the US financial system coupled with other factors will mean that bitcoin could one day reach a quotation of $ 500.000 per coin.
Inflationary pressures
In a post by Winklevoss Capital, the two explained how, although they are historically strong assets, currently gold, oil and the US dollar have "fundamental problems" when viewed from the perspective of a store of value.
The twins speculated that the government-imposed trillion-dollar printing and loans between government departments (the Federal Reserve buys billions of debt from the Treasury) are factors that will ultimately lead to inflation.
"Even before COVID-19, and despite the longest bull run in US economic history, the government was spending money like a drunken sailor, cutting taxes like Crazy Eddie, and printing money like a banana republic," the brothers.
Furthermore, the arrival of the coronavirus outbreak is expected to increase the US debt-to-GDP ratio more this year than it has in the past decade. The solutions available to this debt - soft default, austerity or hard default - are not pretty, according to the post, and would all lead to further inflationary pressures and other problems.
Gold and oil more vulnerable than Bitcoin
The post points out that oil and gold also have problems. Oil suffers from the fact that there is more supply than was realized with the advent of fracking, while COVID-19 has made it clear that the industry is vulnerable to "demand shocks".
Demand will also come under pressure to move from carbon-based energy to more environmentally sustainable alternatives, they predict. And gold… Winklevoss's argument argues that although it is currently a reliable store of value and "the classic hedge against inflation," commercial asteroid mining will threaten this status in the future. More prosaically, the precious metal also suffers from being notoriously difficult to transport, especially during a pandemic.
The Bitcoin solution
Bitcoin, or "Internet's native money," would solve these problems, they argue. "Bitcoin is not just a rare commodity, it is the only known commodity in the universe that has a deterministic and fixed supply," according to the article.
This means that the cryptocurrency is not prone to suffering shocks that gold or other commodities may face. Since its inception, bitcoin has rapidly conquered gold territory and, if the current trend continues, "the bullish scenario for bitcoin is that it is undervalued by a multiple of 45".
That could mean a bitcoin price in the region of $ 500.000 per unit, they say, although no deadline is set for this forecast. Going further, the Winklevoss brothers suggest that a price of $ 600.000 would be possible if bitcoin were to replace some of the $ 11,7 trillion in governments' foreign exchange reserves. "Bitcoin is ultimately the only long-term protection against inflation," they write. As of press time, the cryptocurrency is trading at around $ 11.575.
