“I respect dreams, but you shouldn’t be too indulged in them. The likelihood that Bitcoin will meet the three goals of instant person-to-person (P2P), payable anywhere in the world, free or low commission is zero.”
In January 2018, when the cryptocurrency investment fever blew, Chairman Ryu Si-min <제이티비시>(JTBC) argued in a TV debate that “Bitcoin is a scam”. Skeptics, such as Chairman Yoo, predicted that Bitcoin could not act as a currency. It takes more than 10 minutes to process a transaction, and in the meantime, prices often fluctuate significantly.
Now three years have passed. Even advocates rarely say that Bitcoin is suitable for payment anymore. Instead, they came up with the logic that Bitcoin is useful as a means of storing value. It is a so-called’digital gold’ discourse. In fact, more and more people are looking at bitcoin as an alternative investment destination for cash and gold.
There is an unprecedented increase in liquidity behind Bitcoin as a new investment target. After Corona 19, as central banks in each country have implemented quantitative easing policies, the value of cash, including dollars, has fallen. As the low-interest rate policy continued, liquidity in assets such as real estate and stocks was concentrated and prices soared.
Gold prices also started to rise. Gold has historically been in the spotlight as an alternative investment to diversify the risks associated with every decline in the value of money. Unlike fiat currencies, whose value decreases as the central bank issues them, gold has been a safe asset due to low price volatility.
In addition, bitcoin has recently begun to attract attention as a means to hedge inflation. In a recent report, S&P, a global credit rating agency, explained that the amount of bitcoin mined at 21 million is set to be similar to gold in that it is less affected outside the traditional financial market, and it is difficult to easily control the supply. S&P added that investors see Bitcoin as an attractive investment destination like gold.
Citibank said that just as gold prices rose in November last year as a result of extreme inflation in the 1970s, the recent quantitative easing could raise the price of bitcoins to $318,000 each by December 2021. I have released a report.
In the fourth quarter of last year alone, about $2.8 billion (about 3.1 trillion won), three times the amount raised in the previous quarter, was collected in the bitcoin trust (GBTC and GBT City) of the digital asset manager Grayscale. JP Morgan also evaluated that “the competition between bitcoin and gold has already begun” based on the recent performance of GBT.
In fact, institutional investors, especially hedge funds and ultra-high asset prices, are increasingly adding bitcoin to their portfolios. MicroStrategy, a US NASDAQ-listed company, has about 7,784 bitcoins (about 2.6 trillion won) by steadily buying bitcoins as in-house reserves. The company also announced plans to issue a $650 million convertible bond to buy additional bitcoins. It means that the investment value of bitcoin is high enough to live in debt.
It is reported that American universities such as Harvard and Yale that operate large amounts of development funds have also opened accounts on cryptocurrency exchanges such as Coinbase since 2019 and have invested directly in Bitcoin, etc. Blackrock, the world’s largest asset manager, presented the possibility of investing in future bitcoin futures in an investment product statement submitted to the US Securities and Exchange Commission (SEC) in January.
However, the fact that the market cap, which is close to $200 billion, evaporates in a day, is highly volatile, which is a homework that must be solved in order for Bitcoin to become a reliable investment target. JP Morgan sets the long-term target price of Bitcoin at $146,000 (about 160 million won), and has a clue that the price volatility should be lower than now.
JP Morgan believes that the change in bitcoin price will ultimately take the same direction as gold, but it will take years. In the end, it is said that there is a real difficulty for Bitcoin to replace gold right away.
In a recent letter to investors, Ray Dalio, who founded the world’s largest hedge fund Bridgewater Associates, called bitcoin a “great invention” and assessed that it could become an asset similar to gold in the future. Still, he drew a line of optimism, saying, “Bitcoin is a long-term option investment in a very opaque future that will allow me to invest 80% of the amount that I can afford to lose.”
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