Will Bitcoin eventually reach $1 million? Super bull predicts Bitcoin will become a reserve currency

Source: FX168, Author: Becky

Bitcoin could rise to $1 million in the long term and become a global reserve currency, an asset manager says.

Anthony Pompliano, co-founder and partner at cryptocurrency hedge fund Morgan Creek Digital Assets, said Bitcoin could reach $500,000 before the end of the decade. He added that the price of each Bitcoin could eventually reach $1 million, but did not give a specific timeline.

“I think bitcoin will eventually become a global reserve currency. I think bitcoin will eventually be much larger than the gold market cap,” he told CNBC’s “Beyond the Valley.”

The price of Bitcoin has surged in the past few months, surpassing $50,000 for the first time this week.

There are many factors behind the Bitcoin craze.

On the one hand, institutional and retail investors are participating enthusiastically. Big companies are also getting more involved in cryptocurrencies. Square bought some Bitcoin last year, and Elon Musk's electric car maker Tesla bought about $1.5 billion in Bitcoin, according to a filing this month. Musk and Square founder Jack Dorsey are both supporters of Bitcoin.

At the same time, central banks around the world have been easing monetary policy, such as lowering interest rates and purchasing assets through quantitative easing programs, to help cushion the economic blow from the coronavirus pandemic.

“With trillions of dollars being printed and pumped into the economy, everyone from individuals to financial institutions to corporations are looking around the world for the best way to protect their purchasing power, and they ultimately decide on Bitcoin,” Pompliano said while discussing the reasons behind Bitcoin’s surge.

The Bitcoin bull based his prediction that Bitcoin could reach $1 million on several factors, including the cryptocurrency’s scarcity (there is a cap of 21 million coins ever created) and the decentralized nature of the technology.

There is no central authority like a central bank that controls Bitcoin.

Instead, the Bitcoin network is made up of miners who process transactions. These miners operate large numbers of specialized computers to carry out the process of mining Bitcoins.

Because there are so many different miners, no single entity controls the network, and because the computers they use are often very powerful machines, Bitcoin supporters claim the network is one of the most powerful computer networks in the world.

“As more people enter the market, liquidity increases. The more liquidity, the more utility. The more utility, the more stable the price … that’s when you get this change,” Pompliano said.

“If you think about the internet economy, there is no native currency… (Bitcoin) will eventually become the global reserve currency for the internet generation.”

However, as the cryptocurrency continues to rise, JPMorgan warned of future risks.

In January, JPMorgan published a note to clients that gave Bitcoin a “theoretical” long-term price target of $146,000 as it begins to compete with gold.

Gold is widely considered a “safe haven” asset, with investors flocking to it during times of political strife or financial market turmoil. Bitcoin is now beginning to develop that reputation.

“Bitcoin is competing with traditional gold. Bitcoin is a form of digital gold,” Nikolaos Panigirtzoglou, global market strategist at JPMorgan, said on CNBC’s “Beyond the Valley.”

He said the value of gold held by the private sector for investment purposes alone is about $2.7 trillion. For Bitcoin to reach that level, the price would need to be around $146,000.

But there are caveats, the biggest of which is the volatility of bitcoin prices. The digital currency is known for its wild price swings. Panigirtzoglou said bitcoin is five times more volatile than gold.

The key to Bitcoin’s volatility converging with gold lies in institutional acceptance, JPMorgan strategists say.

“The faster the pace of institutional adoption, the faster the volatility convergence will be,” he said.

However, there are still risks to the current rally. Although it is driven by institutional investors, there is also a high level of participation from retail investors.

“The biggest risk is that the flow impulse we have seen in the last few months slows down significantly from now on,” Panigirtzoglou said.

“Especially when the economy reopened and people went back to the office, they had less time to trade from home, so retail flows slowed down from then on,” he added.