(Kitco News) The crypto market is maturing and Bitcoin is on its way to becoming the world’s digital collateral as adoption progresses and prices continue to rise, according to Bloomberg Intelligence.
“There’s little doubt Bitcoin is the most fluid, 24/7 global trading vehicle in history and well on its way to becoming digital collateral in a world going that way,” said Bloomberg Intelligence senior commodity strategist Mike McGlone. “It appears a question of what might trip up the forces of increasing demand and adoption vs. diminishing supply and the rules of economics that point to rising prices over time.”
Despite lagging behind gold this year, Bitcoin is most likely to continue to outperform the precious metal. Year-to-date, Bitcoin is down about 2% and gold is up nearly 6%.
Bitcoin’s price trajectory remains in an uptrend due to the cryptocurrency’s diminishing supply and increasing adoption, McGlone wrote in his April outlook, adding that Bitcoin is on its way to $100,000.
“Something unlikely has to happen to trip up Bitcoin as there appears to be little to stop it from continuing to outperform gold,” he said. “Diminishing supply is a primary Bitcoin feature that favors price gains, if the rules of economics apply. New coins are limited to 900 a day by code until 2024, then it will be cut in half. The 2020 halving reduced supply from 1,800 a day. What’s different from past post-supply cut years, 2013 (55x) and 2017 (15x), is the newly mined Bitcoins will decline to about 1.7% of the amount outstanding for the first time in 2023, vs. closer to 4.3% in 2017 and 15% in 2013.”
What is different about Bitcoin is its cap of 21 million Bitcoins, with 90% of them already mined. Last week, Bitcoin hit a new milestone, with records showing that 19 million Bitcoins have been minted so far.
The next reward halving is expected to happen in May 2024. And based on the halving schedule, the last bitcoin is projected to be mined sometime in 2140.
“We see probabilities tilted toward the crypto staying the course into the mainstream in a world going digital,” McGlone said. “Due to its nascent nature and futures, Bitcoin can earn much more income than gold.”
Russia’s invasion of Ukraine could be an important moment for Bitcoin and its volatility levels. “At about 5x the 260-day volatility of gold, Bitcoin’s relative risk appears to be turning lower and compares with similar peaks around 10x in 2018 and 12x in 2011,” McGlone said. “What matters is how the crypto comes out from what may be the beginning of a long-overdue mean-reversion period in equity prices.”
And most of the signs are pointing to higher Bitcoin prices from here. “A key uncertainty for Bitcoin’s future is adoption, and we see little to stop the process of the benchmark crypto becoming global digital collateral,” McGlone noted. “The bottom line for most commodities is that higher prices thwart demand and increase supply, while the opposite may be true in Bitcoin. Competition has inspired over 18,000 crypto wannabes, but Bitcoin, Ethereum and crypto dollars top the enduring survivors list.”
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