(Kitco News) The popular cryptocurrency is known for its volatility, so don’t be surprised to see prices climb to $ 1 million this decade as bitcoin becomes rarer than gold and large pension funds are starting to add up, according to Fred Pye, president and CEO of 3iQ.
“Bitcoin is already the most successful investment in the history of the world. Nothing has gone from zero to $ 1,000 billion in ten years,” Pye told Kitco News, referring to the market capitalization of the bitcoin.
When asked to compare bitcoin and ethereum to commodities, Pye described bitcoin as gold and ethereum as Dr Copper.
“Gold is a store of wealth. The scarcity of gold and bitcoin is equal right now, but in two years bitcoin will be twice as rare as gold,” he said.
On the flip side, the second largest cryptocurrency ethereum behaves more like Dr Copper as it represents the overall health of the digital economy, just as copper is known to predict turning points in the health of the world. Mondial economy.
“The Ethereum blockchain is like Dr. Copper. If copper increases, the health of the overall economy is doing very well. Likewise, if Ethereum increases, the overall health of the digital economy increases,” he said. added.
Bitcoin’s limited supply and the halving process are what make massive price spikes possible. The bitcoin halving happens every four years and that is when the reward for mining bitcoin transactions is halved, which also reduces the speed at which new bitcoins come into circulation. The last bitcoin halving dates back to May 2020.
Looking at past and future halves, bitcoin will hit $ 100,000 over the next two years, then hit $ 1 million four years later, Pye pointed out.
“The supply of bitcoin is halved every four years. We have seen the price of bitcoin go up 10 times every time it has been halved. So we went from $ 100 to $ 1,000, from $ 1,000 to $ 10,000 Right now we are on our way from 10,000 to 100,000. Four years after that, that is, six years from now, we plan to go from 100,000 to 1 million dollars potentially. And then after that we would go from $ 1 million to $ 10 million if the scarcity properties play out the right way. “
Discussing the recent wave of volatility in the crypto space, Pye said that a sell-off like May’s 50% retracement is “perfectly normal” for a new asset.
In late May, bitcoin fell from its all-time highs of $ 64,895.22 in April to nearly $ 32,000. “Bitcoin went from $ 1,000 to $ 20,000, then fell back to $ 3,000, then down to $ 60,000. And now it’s between $ 30,000 and $ 40,000,” he said.
What triggered the snowball effect was China again trying to ban the use of bitcoin transactions as well as mining. “And that’s really concerning for a country like China because everyone knows China controls the currencies. And now you have this trillion dollar asset that you can’t control, which is why we love it, ”Pye said.
But China’s policy has no impact on the overall investment case for bitcoin, noted the CEO of 3iQ, which offers bitcoin and ethereum ETFs on the Toronto Stock Exchange.
What is going on behind the scenes are the big pension funds and other big institutional investors doing bitcoin due diligence. Over time, they will start to invest, which will be explosive for the cryptocurrency.
So far, bitcoin has only seen “cowboy” type hedge funds as well as Elon Musk type figures investing in bitcoin, while real money has remained on the sidelines.
“Now the real decision makers, who control the real wealth of the world, are starting their due diligence because we have due diligence sessions on a daily basis with organizations and institutions looking to expose themselves to this space,” Pye said. .
It will be some time before the big guys get involved. But it is not for lack of interest. This is because bitcoin, as a digital asset, does not currently fit into their investment policies.
“Their investment policy statements have never taken into account a new technology or a new asset class. They all talk about bonds, stocks, gold, copper or silver, or ‘other commodities. But bitcoin is its own unique asset class. So now you actually have to go back to your board or pension board and change your investment policy statement to allow you to Really invest in it, so it’s not going to happen quickly, but it is happening, ”Pye explained.
And this is one of the main reasons that bitcoin is not yet in a bubble. “You know it’s a bubble when everyone has it. But right now the biggest pension funds in the world don’t have it. We’re a long way from the bubble,” he said. “It took ten years for pension funds to use email. So I understand that pension funds take over ten years to use bitcoin.”
For an average investor, this is great news that large institutions are not yet involved in bitcoin as the price will reflect this. And the big guys can afford to buy $ 1 million bitcoin, but it might be too late for the average investor, Pye added.
Owning digital gold, however, doesn’t mean you should own real gold, Pye noted, stating that gold is part of the future-proof wallet. “If you own gold you should own bitcoin. If you own bitcoin you should own gold because of all the silver printing. The problem is stopping the printing presses is very difficult. When they do, you want to own bitcoin, and you want to own gold, “he said.
Speaking of gold, Pye pointed out that it is Canada’s history with gold and commodity pools in general that has facilitated the approval of Bitcoin ETFs.
“The reason the very first product that was approved was a closed-end fund is that Canada understands term pools. This is what our country was built on. And our discussions with the Ontario Securities Commission were to create a term pool that used digital. active as a commodity as opposed to a physical asset as a commodity, ”he explained.
The problem in the United States when it comes to getting approval for a bitcoin ETF is the lack of experience in this area, he added. “If they created an ETF, what normally happens is people can contribute bitcoin into the ETF and get units from the fund. The problem is, there is no way of knowing. ‘Where is that bitcoin coming from fairly quickly, and it could potentially lend itself to money laundering. And that’s the SEC’s number one priority. While in Canada, with cash-settled ETFs and our commodity pool, the Ontario Securities Commission can walk into my office, and they can track anti-money laundering compliance for every coin we have purchased. “
Warning: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes. This is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.