The onward march of Bitcoin (BTC) is attracting the attention of Citibank. The third US bank, through one of its directors, Thomas Fitzpatrick, suggests that Bitcoin could surpass $ 300,000 by the end of next year …
The global head of CitiFXTechnicals product explained in a report titled “Bitcoin: Gold for the 21st Century”. Here are the key elements.
From Bretton Woods to Bitcoin
The paper begins by comparing the current Bitcoin boom to the emancipation of gold from the 1970s. A pivotal period that precipitated the rise of the barbaric relic after 50 years spent between $ 20 and $ 35.
” This period (the 1970s) marked a structural change in the modern monetary regime. The removal of the orthodox relationship between gold and fiat currency has resulted in fiscal indiscipline, deficits and inflation. “
Regular readers of Thecointribune know the little story, but it is always interesting to recall what changed in the 1970s: the roots of the rise in gold from the 1970s date back to the Bretton Woods agreements signed in 1944. These ruled the international monetary system until 1973. They stipulated that only the dollar would be convertible into gold and that all other currencies would have a fixed exchange rate with the US currency. Each country was then had to do what was necessary to balance its trade balance so that its exchange rate did not move.
The dollar therefore became “as good as gold” and replaced gold in the foreign exchange reserves of central banks around the world.. But that “Standard Dollar” collapsed when European nations began to demand gold in exchange for those dollars that were devaluing too quickly. After the loss of half of his gold stocks, President Nixon announced in 1973 the end of the convertibility of the dollar into gold. The Bretton Woods agreements were shattered and gave way to a floating exchange rate regime.
This new monetary system will ultimately always be dominated by the dollar … The reason being that the United States arranged for the bulk of European nations’ imports to be in dollars. And since it was about oil, it was simply necessary to force Saudi Arabia to sell its oil exclusively in dollars. This was the birth of the fiat currency regime as we know it and the petrodollar… Since then, gold has gone from $ 35 to $ 2000 an ounce and the dollar has lost 98% of its purchasing power … #inflation
“Bitcoin is the New Gold”
For the Citigroup banker, we have recently witnessed a new change in the monetary regime characterized by the zeroing of interest rates and debt redemptions (quantitative easing). He believes that the Fed’s decision to let inflation exceed 2% is the most important paradigm shift since the abandonment of the Gold Standard (Nixon), or even since the announcement of quantitative easing.
” Historically, this has benefited gold and it will probably always be true. However, it should be noted that gold suffers from certain limitations. Storage ; THE difficulty in crossing borders; Its paper equivalents (Futures …) which may not reflect the real rise in the value of gold “, says Tom Fitzpatrick before adding that “Bitcoin is the new Gold”:
” Bitcoin is a finite asset. It is digital. It crosses borders easily and offers a certain opacity (pseudonymous). This last point is, I think, useful. The debt will have to be paid someday. Either directly or indirectly. “Directly” means that sooner or later it will have to be checked out and the money will have to be taken somewhere (tax). Although Bitcoin could be increasingly regulated, it is a natural safe haven to avoid being the joke. A switch to “Indirect” cash will be done by devaluing the currency by generating strong nominal growth (inflation). Which amounts to failing in a soft way. I do not believe in a violent default, especially in a world where holding the international reserve currency is so crucial. “
To put it another way, Bitcoin will be a formidable hedge against future inflation …
CBDC – “Double hedge Sword”
The author of the report continues with some very interesting remarks about central bank CBDCs:
“Central Banks are discussing more and more the digitization of currencies (end of cash). It is a double-edged sword. On the one hand, this will create a very effective mechanism for distributing money for free. But on the other hand, it makes it easier to confiscate the money (negative interest rates). Both of these scenarios would be positive for Bitcoin. We would have in the 21 st century (Bitcoin vs CBDC), is the equivalent of what happened in the 20th century (Gold vs Fiat paper).“
Thomas Fitzpatrick ends with aggressive Chartist forecasts by suggesting that it is not impossible that Bitcoin will be worth $ 318,000 in December of next year.
” As far-fetched as it sounds, it would represent a mere 102-fold increase from the 2018 low. It would be the weakest rally historically. The last bull runs saw the price of Bitcoin increase by 555 (from 2011 to 2013). And by 121 (from 2017 to 2018). “
There’s nothing far-fetched about this anticipation. Especially if we assume that Bitcoin is indeed augmented gold. We will add in this regard that we can pay in satochis but not in gold dust … If the 21 million Bitcoins were worth as much as all the gold in the world, then one BTC would be worth $ 550,000 …