According to VanEck, an American investment company, Bitcoin has twice the upside of gold and may be valued at up to $4.8 million per coin if it becomes the global reserve asset. The bullish outlook for Bitcoin (BTC) was expressed in a March 30 insight piece written by VanEck’s Head of Active EM Debt, Eric Fine, and Chief Economist Natalia Gurushina, who attempted to compare the price implications for gold and Bitcoin (BTC) if either were to be adopted as the backing for global currency regimes.
According to VanEck’s study, the estimated price for BTC ranged from $1.3 million to $4.8 million. The lower estimate was based on BTC as a monetary base (M0), which comprises all the circulating supply of a currency as well as bank deposits, but is not a popular indicator for economists to look at. The greater projection came from the more commonly used M2 assessment, as a measure of the money supply that includes all bank deposits in a currency and their potential to be converted into cash.
Considering “a very substantial fraction of central banks have little or no reserve gold,” Fine and Gurushina moved further toward the M0 price estimate of $31,000 as a plausible starting point for gold’s per-ounce pricing. Because of the lack of resources, the M2 prediction of $105,000 per ounce of gold is significantly higher and less reliable.
Recent geopolitical turmoil has already prompted Russia to consider using alternative currencies, such as Bitcoin, to conduct oil trades with “friendly” allies like China and Turkey. The trend might spread to other countries’ central banks, undermining the US dollar’s dominance. Fine and Gurushina feel that the Chinese Yuan should be regarded as the top forecast for a new reserve currency, but that governments will likely rebalance their holdings anyway.
To varying degrees, central banks are likely to shift their reserve mix away from dollars (and euros and yen) and toward something else. As a result, several central banks (as well as private players) will diversify their reserves.
The researchers cautioned readers to keep in mind that the projections are only beginning points for investors to develop a framework for valuing gold and Bitcoin in the extreme case that either becomes a worldwide currency.
It was highlighted that there are alternatives to gold or Bitcoin, such as finite real estate, endless shares, and even developing market currencies. VanEck has a stake in the crypto business with its Bitcoin Strategy ETF (XBTF), a Bitcoin futures exchange-traded fund (ETF) with a total net asset value of $30.1 million. In addition, the business has filed with the Securities and Exchange Commission (SEC) to create a new ETF focusing on gold mining and cryptocurrency mining firms.
