Despite the recent slow decline in the worth of bitcoin, investors and analysts are saying the cryptocurrency will most likely overtake gold in the next decade. Why? How?
Bitcoin, the world's most valuable cryptocurrency, has endured a slow and steady growth over the years before its recent boom. A dollar investment in Bitcoin in 2009 is worth well over $20 million now (in 2017, which is eight years later).
Since the not-so-long boom in the value of the currency (from December 2016 to June 2017), confidence in it and its price has grown geometrically, and many people believe it is the next gold.
Thomas Lee is one of those people, who believes the Bitcoin market will be worth more than gold in the next five years. Lee is one of the biggest Wall Street equity strategists, and he's also the co-founder of Fundstrats.
According to him, Bitcoin and its sibling Ethereum are cannibalizing gold. Lee says Bitcoin will be worth between $22,000 to $55,000 per unit before the end of 2022, a gigantic leap from the $2530 at time writing, and he's got some reasons to back his claim.
Lee believes Bitcoin will in time be the substitute for gold, with the growing confidence in it from all sections of the world. He said Bitcoin supply would grow even slower than gold with the way things are going. At the moment, the amount of Bitcoin available to go round is reaching its limit, making it scarce and very expensive. This scarcity, in turn, is making Bitcoin increasingly attractive in relation to gold as an investment option. Hence, it is only a matter of time before investors jump ship from Gold to Bitcoin.
Unlike gold, when the price of bitcoin increases there is not a corresponding increase in production because by design the "discovery" of new bitcoins proceeds in an orderly manner until 2110–40, when 21 million bitcoins will have been issued.
Fundstrat has done some research about this potential leap in Bitcoin's worth and here's a snap from their valuation:
Another reason Bitcoin could grow to over $50,000 in five years is its expected adoption by central banks and other conventional financial institutions (or gradual legitimization in other words). Lee expects banks to start buying bitcoin if its total market cap hits $500 billion, Lee says. "This is going to be a game changer."
If bitcoin becomes legal tender in an increasing number of countries, investment in it is going to skyrocket, coupled with the fact that it has a limited supply. The rush will get madder as everyone wants to get a piece of the action.
The Bitcoin rush is accelerating at the moment, despite the cryptocurrency's marginal depreciation in the past few days. Attention has shifted to mining bitcoin at the moment, and miners are excited by the rush. The shares of graphic card makers Nvidia and AMD have risen in recently due to increased patronage. Miners now arm themselves with machinery to mine Bitcoin more efficiently. Asus particularly just released a graphics card, specially made for mining.
To top it all off, some die-hard guys hijacked an Italian bank's server for the sole purpose of mining Bitcoin. Heads up, things are just starting to heat up, it's only going to get madder.