'Gold Is so Gone' as Bitcoin Is a Better Store of Value: Tim Draper

Billionaire venture capitalist Tim Draper has predicted that OpenNode, a multi-layered, Lightning Network (LN)-enabled Bitcoin (BTC) payment processing platform, will be widely adopted in the foreseeable future.

Draper, an electrical engineering graduate from Stanford University, believes the Bitcoin network will be able to compete with more established payment gateways, including those established by the VISA network.

When questioned about whether people are more focused on developing products during the bear market (in a recent interview conducted by CryptoWendy), Draper confirmed that many companies have been building various crypto-related solutions in order to make it easier “to move Bitcoin around.”

Commenting on when mass adoption of cryptocurrencies will occur, Draper said a lot of people are already using them right now. However, he explained Bitcoin’s market value has not yet been established which is why the pseudonymous cryptocurrency’s price has been fluctuating quite a lot.

Responding to a question about whether he thinks altcoins make good investments, Draper noted that “the ones that are going to be around for a long time, [they’re already] rising to the top” (in terms of market capitalization. He added that this is something ”we’re seeing right now and there are some [altcoins] out there that are still going through the process of being developed. They’re going to have a big impact on the world’s [economy.]”

It’s Important To Know The People Behind Cryptocurrency Projects

He continued:

A lot of success in crypto … if you want to put your money to work … [we should look at] who’s behind the [various] cryptocurrencies. If we do that, we’ll be holding on to the right currency when the time comes.

Commenting on the business model adopted by crypto entrepreneurs, Draper confirmed most of the digital asset and blockchain companies were startups. He acknowledged the Bitcoin and the Ethereum (ETH) networks are established platforms, however the majority of crypto projects are still in their early stages of development.

Tezos And Bancor Were “Huge Offerings”

Going on to mention that when his firm, Draper Associates, supported the launch of Tezos (XTZ) and Bancor (BNT), those were “huge offerings.” 

He went on to point out that the “great entrepreneurs of the world are those that rise to the occasion. When the chips are down, they continue to” stay focused and work on their projects.

While comparing Bitcoin to the rest of altcoins, Draper remarked that “gold is so gone.” He noted: 

What would you use gold for when you can store value with Bitcoin? It’s complete nonsense. But I’m sure a lot of people still use it and they think of the gold standard as like the good coin. But I look at it, and I say, you’re comparing Bitcoin to gold?

According to Draper’s assessment, people will eventually begin spending their Bitcoin holdings when its fair value has been established. He also confirmed that he’s sticking to his $250,000 Bitcoin price prediction by 2022-2023 and that this is not unrealistic as the world’s most dominant cryptocurrency would still only account for 5% of the world’s GDP at this price.

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

Featured Image Credit: Photo via Pixabay.com