The price of bitcoin could be moving toward the $50,000 mark in the near future, as investors move funds out of gold and bet on the cryptocurrency space, according to Bloomberg senior commodity strategist Mike McGlone.
On the February 2021 edition of the “Bloomberg Crypto Outlook,” McGlone wrote that he believes the price of bitcoin is showing strong support around the $30,000 mark and that “increasing institutional adoption and the potential for the benchmark to become a global reserve asset” could see it move to $50,000 a coin.
The report pointed to funds moving out of gold into BTC, and highlighted the growth of Grayscale’s Bitcoin Trust (GBTC), in contrast to the declining total known exchange-traded fund (ETF) holdings of gold. GBTC, McGlone wrote, has grown to 10% of the “$210 billion tracking-gold ETFs.”
The analyst wrote that the endurance of low interest rates, quantitative easing, and rising debt-to-GDP may have been supporting BTC and gold. GBTC’s bitcoin holdings have risen to nearly 700,000 BTC, while gold ETFs have seen their gold holdings drop to about 109 million ounces, from an October peak above 111 million.
In a world going digital, it’s logical to expect more funds to flow toward Bitcoin and away from precious metals. Outflows from gold exchange traded funds and inflows for products tracking the benchmark crypto support a potential paradigm shift.
McGlone pointed out that “absent a major technology glitch,” gold allocations are “primarily at risk if the crypto becomes a reserve asset.” As such, investing between 1 to 5% of one’s portfolio into the flagship cryptocurrency “becomes increasingly prudent.”
Rising stock market volatility, he wrote, has historically been beneficial for both gold and bitcoin. While volatility has in the past been used to criticize the cryptocurrency as an investment, the strategist noted a combined investment in BTC and XAU is showing a 260-day volatility rate of 30%, lower than that of the S&P 500, at 35%.
BTC’s volatility could, he wrote, match that of gold by 2024 as the market matures. Its current 260-day volatility is at 50%, which McGlone compared to gold’s volatility back in 1980. For bitcoin to become less volatile than gold, he wrote it does not have to do much:
To approach this milestone, Bitcoin may have to simply maintain what it’s been doing: appreciating in price and maturing.
McGlone, it’s worth noting, has in the past predicted the market capitalization of bitcoin would reach $1 trillion in 2022. The strategist also addressed Ethereum in its report, claiming the $1,000 mark is turning into a support level that’s “unlikely” to break.
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