Bitcoin and cryptocurrencies had a terrible start to 2022, continuing the downtrend from late last year as price pressures mounted.
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Bitcoin price has lost around 40% since its November peak, from nearly $70,000 per bitcoin to this week’s lows of $41,000. Meanwhile, Ethereum and other major coins have also tumbled back, wiping roughly $1 trillion in value from the crypto market since their November high.
Now, Wall Street giant Goldman Sachs GS has predicted that Bitcoin will increasingly compete with gold as a “store of value” — and could hit $100,000 within five years.
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Wall Street giant Goldman Sachs relaunched its cryptocurrency trading desk in 2021 after Bitcoin … [+]
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“Bitcoin may have applications beyond a simple ‘store of value’ – and digital asset markets are much larger than Bitcoin – but we believe comparing its market cap to gold can help provide parameters for plausible outcomes for Bitcoin returns set,” Zach Pandl, co-head of FX strategy at Goldman Sachs, wrote in a research note. Bitcoin currently has a market cap of around $800 billion compared to gold’s $11.4 trillion.
“If bitcoin’s share of the store of value market increased to 50% over the next five years (without growth in aggregate demand for stores of value), hypothetically, the price of bitcoin would rise to just over $100,000, which represents an average annual return of 17% up to 18%.”
Bitcoin’s reputation as a digital store of value, similar to gold, has been fueled by the rising inflation that has hit economies around the world over the past year. In May 2020, renowned investor Paul Tudor Jones put Bitcoin firmly on the Wall Street map when he called it “the fastest horse to beat inflation.”
“Bitcoin has superior monetary qualities to gold, and once it achieves a critical mass of acceptance as a store of value, bitcoin has tremendous potential to become a global reserve currency and universal unit of account,” said Hong Fang, chief executive of crypto exchange Okcoin , said in emailed comments, noting Bitcoin’s scarcity through its fixed supply of 21 million coins, its digital durability and accessibility, and its resilience to censorship.
“Bitcoin is not just an asset class – the bitcoin network is proving to be a viable global payment network, with bitcoin being programmable money,” added Fang. “In 2022 we will see that Bitcoin will prove itself not only as a store of value but also as a medium of exchange and a unit of account.”
Bitcoin price has skyrocketed by just over 400% since January 2020, riding an asset price boom that has propelled stock markets to all-time highs — and helped Ethereum’s price outperform Bitcoin.
Last year, a leaked report from Goldman Sachs predicted that Ethereum, the second largest cryptocurrency after Bitcoin, has a “high chance” of overtaking Bitcoin as a “dominant” store of value – calling it the “Amazon AMZN of information”. Investors have focused on Ethereum in recent years as a surge in interest in decentralized finance (DeFi) and the ongoing craze around non-fungible tokens (NFT) has propelled Ether’s price higher.
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Bitcoin price had a rocky 2021 as it fluctuated wildly due to extreme volatility. Ethereum, that … [+]
Bitcoin’s success over the past few years has prompted both companies and countries to experiment with it like never before. Business intelligence software company MicroStrategy MSTR has pioneered the conversion of its cash reserves into Bitcoin, inspiring Tesla TSLA CEO Elon Musk to add $1.5 billion worth of Bitcoin to the Tesla TSLA balance sheet in January 2021 to include electric car manufacturers.
MicroStrategy Chief Executive Michael Saylor has predicted that Bitcoin price could eventually reach $6 million.
Meanwhile, the Central American country of El Salvador has adopted bitcoin as its national currency alongside the US dollar as part of a plan to integrate bitcoin into its economy and society.