Is Bitcoin the "new gold" and will its price soar to $55,000?

Bitcoin's recent rally has paused, but some big-name strategists are bullish, saying that Bitcoin has the potential to become a substitute for gold and estimating that the price may rise to $55,000 in five years.

MarketWatch and CNBC reported that Tom Lee is the co-founder of Fundstrat Global Advisors and the first well-known strategist to predict the trend of Bitcoin. He said that virtual currencies erode the demand for gold, and the model shows that the price of each Bitcoin may soar to US$20,000 to US$55,000 in 2022, and investors need to find ways to profit from the potential rise.

Lee predicts that Bitcoin supply is about to reach its upper limit, and the price is expected to soar. The market value of gold is $7.5 trillion, far higher than Bitcoin's $41 billion, but gold supply has increased significantly, while Bitcoin supply is approaching the upper limit of 21 million coins. The model shows that the growth rate of Bitcoin supply will slow down to 1.5% in 2020, which is lower than the growth rate of gold. The rarity of Bitcoin will make the virtual currency more attractive than gold.

The second reason for the surge in Bitcoin is the central bank. Lee believes that if the total market value of virtual currencies reaches $500 billion, central banks will join the purchase, which will rewrite the market landscape, increase the legitimacy of Bitcoin, and make it a gold substitute. Currently, the total market value of virtual currencies such as Bitcoin and Ethereum is about $100 billion.

However, Bitcoin is highly volatile and its price could drop by half if one is not careful. Lee admitted that Bitcoin's annualized volatility is 75%, much higher than gold's 10%. However, after the United States abandoned the gold standard, gold's volatility also reached 90%. He estimated that Bitcoin's volatility would gradually stabilize.

In the early morning of the 10th Beijing time, Bitcoin was quoted at US$2,531.93.

The picture shows the trend of Bitcoin. Click here to copy the transactions of the world's top investors

The market has different views on Bitcoin.

Forbes and Mint reported on June 12 that well-known investor Raoul Pal said at the Mauldin Economics Strategic Investment Conference that the explosive growth of Bitcoin is a mania, and people want to seek rewards. Bitcoin is currently in a bubble stage, and this virtual currency often rises and falls sharply, first rising by hundreds of percentage points, and then suddenly collapsing. He started holding Bitcoin at $200 and sold his position last week. He said he didn't know how long Bitcoin could soar, but the crazy rise would inevitably end in a collapse.

Pal's reasons for being pessimistic about Bitcoin are not limited to this. Bitcoin is considered a store of value and is limited in quantity, with a maximum of 21 million coins. However, there has been talk of a hard fork of Bitcoin recently, which would split Bitcoin in two and create more Bitcoin. Pal pointed out that even if miners do not rewrite the program, the fact that Bitcoin can be issued in large quantities is enough to prove that it is not an appropriate long-term store of value.

MoneyDJ News reporter Chen Ling reports