The co-founders of the US-based Gemini exchange, Cameron and Tyler Winklevoss, predict the price of Bitcoin (BTC) could reach USD 500,000, as the the US debt-to-GDP ratio is likely to increase more in 2020 alone, than it did over the entire prior decade. They believe this will trigger inflation, and cause investors to shift their assets into alternative investments such as cryptocurrencies, and especially bitcoin.
At the time of writing, the bitcoin price is trading at around $11,500.
In a post on the Winklevoss Capital blog Thursday the brothers wrote: “Inflation is coming. Money stored in a bank will get run over. Money invested in assets like real estate or the stock market will keep pace. Money stored in gold or bitcoin will outrun the scourge. And money stored in bitcoin will run the fastest, overtaking gold,”.
The brothers point to government money printing in the trillions and borrowing between government departments (as the Federal Reserve buys billions in debt from the Treasury), as factors that will ultimately lead to inflation.
“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,”.
The brothers claim, ”While [COVID-19] has hurled us further down the path towards a soft default, the greater culprit is the U.S. government’s permanent and unapologetic policy shift towards a debt-monetization model to finance its operations,.
Oil suffers from the fact that there is more supply than had been realized with the advent of fracking, while COVID-19 has made it clear that the industry is vulnerable to “demand shocks.”
They predict that demand will also suffer from pressures to move away from carbon-based energy to more environmentally friendly alternatives.
The Winklevoss’ argue that gold, while currently a reliable store of value and” the classic inflation hedge,” is threatened by commercial asteroid mining threatens that status in the future. The precious metal also suffers from being notoriously difficult to transport, especially during a pandemic.
They write in the article that, “Bitcoin is not just a scarce commodity, it’s the only known commodity in the universe that has a deterministic and fixed supply,”.
This means bitcoin is not prone to the supply shocks that gold or other commodities might face.
With other advantages like ease of portability and strong security, bitcoin is 10 times “better at being gold than gold,” they write.
Since inception, bitcoin has advanced rapidly into gold’s territory and, if the current trajectory continues, “the bull case scenario for bitcoin is that it is undervalued by a multiple of 45.”
This could mean a bitcoin price in the region of $500,000 per unit, they say, though no time frame is provided.
Furthermore, the forecast does not even factor in the possibility of BTC displacing a share of the USD 11.7 trillion dollars of fiat foreign exchange reserves that are currently held by governments worldwide.
“Foreshadowing this, at least one publicly-traded US corporation has begun holding bitcoin as a treasury reserve asset. If central banks start to diversify their foreign fiat holdings even partially into bitcoin, say 10%, then 45x gets revised upward towards 55x or [USD] 600,000 per bitcoin, and so forth,” the brothers said.
“Bitcoin is ultimately the only long-term protection against inflation,” they write.