In an elaborate interview with the Business Insider, Thomas J Lee, a well-known wall street strategist and managing partner at Fundstrat, a financial advisory firm, predicted that even by the most conservative of estimates, a Bitcoin will be worth at least $25000 in 2022, just five years from now.
Network effect
Pointing out that Bitcoin, a digital means of value exchange, is very much a digital service like Facebook, Google or the world’s largest e-commerce marketplace Alibaba, Lee claimed that the ‘network effect’ applies to Bitcoin. The network effect refers to an exponential rise in utility and value of a network as more people adopt it. It explains how social networks become much more powerful and valuable than one would expect as they acquire new users. Further, the Wall Street analyst asserted that Bitcoin’s valuation is reasonable when one applies Metcalfe’s law, which states that a network’s value is proportional to the square of its number of users. Also, the analyst observed, though there are more than six hundred actively traded cryptocurrencies now, and more are being launched by the day, more investors are shifting their holdings to Bitcoin from other coins with every new cryptocurrency launch. This, he said, shows that Bitcoin is the reserve currency of the cryptocurrency world and that it’s way ahead of other cryptocurrencies in terms of user base and features.
Gold 2.0
In answer to why Bitcoin is so highly valued, the analyst drew attention to the fact that in its seven years of existence, the blockchain, an encrypted record of Bitcoin transactions, has never been hacked. In fact, he quipped, it would cost $31 billion to fake just one transaction and the prohibitive cost is only set to grow exponentially as more transactions take place and mining difficulty increases progressively. He explained that as a secure record of transactions, Bitcoin derives its value from the blockchain technology. Investors could store their wealth as Bitcoins, assured in the knowledge that the record is immutable.
The analyst argued that for a digital generation used to the internet and computing devices from birth, Bitcoin would seem much more appealing as an investment option than gold or inflationary fiat currency. He added that if just 5% of gold investments shift to Bitcoins from the 9 trillion dollars global gold market, Bitcoin’s price would soar to $25000 and even this would be a very conservative estimate as this calculation assumes a lower monetary inflation that has been historically observed and a progressively rising gold price. The analyst conjectured that at rates of migration higher than 5% of gold investments, the price rise would be much higher and one Bitcoin could even cost a 100 or 200 thousand dollars.
Burgeoning mainstream interest
After calling Bitcoin the best investment one could make this year, the analyst said that since Bitcoin options and derivatives are on the works now, it could be expected that interest in Bitcoin would rise sharply in the upcoming days. He also said that big hedge funds worth billions are starting to invest in Bitcoin and it’s just a matter of time before demand pushes up the price of Bitcoin to unprecedented heights.
At last, when asked about volatility in Bitcoin prices that could dampen investor confidence, he signed off with the response that Gold was as volatile as Bitcoin when fiat money was introduced and that Bitcoin would become much more stable once institutional investors dominate the market and increase liquidity.
Follow the link below to read the full interview.
‘Top strategist: Bitcoin will soar to $25, 000 in five years’
Also Read:
https://blog.unocoin.com/what-to-know-before-you-start-with-bitcoin-3d361a9c4338
