After last month’s rout, crypto is on the rebound.
Over the past week, the price of bitcoin soared 12.1% and the ethereum price jumped 35.5%. XRP
Meanwhile, in a recent interview, Edward Dowd, former managing director of Blackrock, likened crypto’s bear market to the dot-com bust. He thinks it is necessary cleansing of the market that will give rise to crypto equivalents of today’s internet juggernauts.
Speaking on Layah Heilpern’s podcast, Down singled out bitcoin as a leading contender to become the apex crypto in the long run.
Drawing parallels to the dot-com era, the former Blackrock executive called the cryptocurrency “the Amazon of crypto”. He predicts that bitcoin will become much more stable after this bear market. And once its volatility subdues, most investors will adopt it as a modern alternative to gold.
In theory, it’s a feasible thesis. As I wrote last year, “In form, Bitcoin
But so far, bitcoin has been the polar opposite of gold.
Over the pandemic, bitcoin and major altcoins have grown into an increasingly correlated, high beta asset class, which only amplifies stock moves. That signals investors still view crypto as a speculative investment rather than gold-like portfolio insurance.
By Goldman Sachs calculations, today bitcoin claims about one-fifth of the “store of value” market.
One of the reasons investors are slow to adopt it for its original purpose is volatility. “The reason is that, for most institutional investors, the volatility of each class matters in terms of portfolio risk management and the higher the volatility of an asset class, the higher the risk capital consumed by this asset class,” JPMorgan wrote in a note. In other words, the higher the volatility of the asset class, the less capital portfolio managers can allocate to it.
What would happen if Edward Dowd’s prediction came to pass, that is bitcoin’s volatility faded and the cryptocurrency caught up to gold in terms of store-of-value demand?
If bitcoin matched private gold investments, JPMorgan predicts bitcoin’s price could hit $146,000 bitcoin in the long run. Meanwhile, Ark Invest’s Cathie Wood estimated the cryptocurrency could even pass $500,000 if institutional investors spared just 5% of their portfolios for it.
That said, these price targets won’t happen overnight, if ever. Even Dowd, who is a big believer in bitcoin, thinks the crypto cleanse will take time and bitcoin’s mainstream will be a long process.
So, will investors substitute bitcoin for gold’s 5,000-year track record so early on? And will they move a meaningful part of their portfolio to it? These are the questions that will determine where bitcoin will be tomorrow.
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Read More:‘Amazon Of Crypto’—Former Blackrock Exec Predicts Everyone Will Hold This Crypto As Price