Kvě 26

Bitcoin as a Store of Value Could be Worth $40K Within the Next Decade, Says Matt Hougan

· May 25, 2018 · 9:00 pm

Matt Hougan of Bitwise Asset Management believes that the price of Bitcoin could increase by 500 percent in the next ten years. Hougan hinges his prediction on the cryptocurrency becoming an actual store of value and the blockchain permeating several facets of human life.


Is Bitcoin a Store of Value?

Finding a consensus on any argument related to Bitcoin is almost a futile effort at this point. There’s the bubble argument, the economic definition argument, and of course, the store of value argument. Matt Hougan, in a recent op-ed for Forbes, examines the store of value debate for Bitcoin, drawing some interesting parallels with gold.

Right from inception, the virtual currency has been compared with gold. Some proponents are even in the habit of calling the crypto “digital gold.” Critics, however, dispute this idea, saying that the cryptocurrency cannot be compared to gold because it is highly volatile and, as such, cannot be a store of value.

Matt Hougan

One of the most basic definitions of a store of value is an asset that is both tradable and can be stored for future use. By this definition, a store of value must maintain some stability over a reasonable period. Bitcoin is a volatile asset, no arguments there. However, is the volatility exhibited by the number one crypto a misnomer in the finance world? It turns out the answer is no, and Hougan provides hard evidence.

A Little Bit of History Featuring the Post-1971 Gold Market

Today, gold is not only solid based on its physical form, but as an asset, it maintains some level of price rigidity. However, it wasn’t always so. In 1971, U.S. President Richard Nixon dropped the gold standard for the USD. The price of gold and the value of the dollar was no longer tethered together. What happened next? Well, the table below gives an idea of the wild volatility in prices of gold in the decade following 1971.

Gold pricesToday’s crypto critics would be bellowing that gold isn’t a store of value if they examined these figures. However, today, it is universally accepted that the precious metal is indeed a store of value. So, what has changed? The answer isn’t utility as some might point out. Gold has some industrial application use cases but that it is not enough to justify its current price. According to Hougan:

[Gold] is worth $1,300 per ounce because people are willing to pay $1300 per ounce for it as a store of wealth.

Bitcoin price chart

Bitcoin Mirrors Post-1971 Gold

Bitcoin is less than a decade old, which means it isn’t yet a fully formed asset. Hougan believes that expecting the cryptocurrency to behave like a fully matured asset is an argument that lacks economic merit. According to the cryptoanalyst, Bitcoin is passing through the two-stage process of rapid appreciation and declining volatility over time.

2017 saw a parabolic rise in prices that seem to have plateaued in 2018. The Bitcoin volatility, while still considerably high, is declining over time. This pattern exhibited by the number one crypto bears striking similarities to gold after 1971.

Bitcoin volatility chart

Speculative Investment Will Give Way to Real World Use

If Bitcoin follows the pattern set by gold, then it is well on its way to establishing itself as a store of value. Right now, the crypto is held as a speculative investment, but within the next decade, as blockchain utility increases, Bitcoin will become an even more significant part of global finance. The current market capitalization for the virtual currency is $130 billion, which is approximately two percent of the $7.5 trillion gold market cap.

In ten years, Bitcoin could comfortably hold 10 percent of the value of gold, which would mean a conservative price estimate of $40,000. A lot of this depends on how quickly real-world utility applications can be implemented for the cryptocurrency and the assumption that it continues on a similar trajectory to gold.

Do you agree with the argument that Bitcoin is like gold, and as such, a store of value? Will an increase in real-world utility drive the price of Bitcoin higher? Let us know your thoughts in the comments below.


Images courtesy of MarketsMuse, Forbes, Macrotrends, Shutterstock, and Buy Bitcoin Worldwide.

Show comments

Share
Dub 24

BitcoinAverage: Bitcoin Price Stirs Up Bullish Sentiment

Source: bitcoin

Financial Markets

Apr. 11 – 19, 2016 — Over the week of Apr. 11 – 19, the bitcoin price showed early signs of a bullish renewal. The price moved up steadily, +3.6%, on an Apr. 16 high of $435.67 registered at bitcoinaverage.com.

This article was provided by the Vanbex Group on behalf of BitcoinAverage.

This is the highest mark since Mar. 1, which must have excited traders with the prospect of a continuation bull trend that began on September 7.

But, there remains a sense of caution with market analysts awaiting a retest of levels to confirm support for an uptrend.

A user on Reddit said:

“The only thing that gives me any pause in my bullishness is the utterly irrational exuberance I feel right now given the shape of the chart on a wide variety of timescales.”

The last time the price was at these levels, which was on Mar. 1, it was preceded by a sell-off to $382, but the price quickly retraced to trade within a range.

As seen on this chart, the upper and lower limits touched $423 and $427, breaking strongly above $423 on Apr. 14 (encircled), a clear sign of intent.

This time, it was markedly different from a similar attempt on Mar. 26 that faltered just below $428, making this week’s breakout not one to be easily brushed away.

 

On the 3d chart on bitcoinaverage.com, the marginal price changes on lower time frames are difficult to pick out.

Price is still largely in a sideways trend, evidenced by the lowest 30-day volatility in history and currently tied for second on the 60-day chart, 0.74% and 1.31% estimates, respectively.

$440, marked by a bold line, is the most significant level now, as a support/resistance level going back to December 2015.

It is no coincidence that price stalled right below this level, and continues to correct lower. As of writing this, the price sits at $429.

 

Speculators point to the pattern above from the three-day charge, a pennant symmetrical triangle.

Bulls say it is a continuation pattern within the overall trend from the Aug. 24 $198-low. The apex point, where a breakout is expected, is yet to converge as the price lingered between the lower sloping trendline and upper sloping support line.

There has been no confirmation break out, just more sideways action, albeit on a wider range, and this may persist till May.

 

The market is at a critical point, sitting on top of a 20-month resistance level at $400 (1).

Back in August to November 2014 (2), the price was unable to break back above it after an accelerated sell off to $275. A double top rejection preceded a continued bear trend.

At (3) this level is being retested, this time from the bottom. Since November 2015, the price has oscillated around this mark, fueling current uncertainty.

If this level holds, an upward run would follow with a magnitude as large as the sell-off in November 2014. Pricing targets for this scenario sit around, at very least, $650.

 

 

Bitcoin Price Forecast

This week, the price will continue on its retracement from $435 top, down to a support, as low as $420.

This price is low enough to respect the higher lows on the rising trendline, while still respecting the critical $423 as support for a continued uptrend.

The best case scenario is a $425 hold with a renewed uptrend taking over.

Nevertheless, Bitcoin looks bullish over the coming months.

The triangle pattern highlighted is a high probability continuation pattern, and it is now a matter of waiting it out.

The question is how long it will take to pop and when. Price has been stable on the price range since January and volatility is down. It is at a good level for a launch pad to higher marks.

The fundamentals around the bitcoin protocol are better than they were three months ago.

Core is making progress on Segregated Witness, an alternative soft fork approach to increase block capacity. News from China suggests miners are backing Core as well, while Bitcoin Classic, a hardfork capacity increase, has all but faltered.

With the block reward halving around the corner, everything looks ripe for another leg-up.

The post BitcoinAverage: Bitcoin Price Stirs Up Bullish Sentiment appeared first on Bitcoinist.net.

BitcoinAverage: Bitcoin Price Stirs Up Bullish Sentiment

Share