"Bitcoin is a revolution that liberates us from the banks and government that took money hostage."
By ZEV STUB A coin representing the bitcoin cryptocurrency is seen on computer circuit boards in this illustrative picture(photo credit: REUTERS)
Bitcoin is flying like a rocket. The cryptocurrency smashed through the $35,000 mark briefly Wednesday morning, reaching a new high. That represents a 20% gain during the first six days of January alone, after rising more than 300% in 2020.The latest rise follows news that the US federal banking regulator ruled that it would allow banks to use public blockchain networks and use stablecoins for payment activities, providing further evidence of increasing cryptocurrency acceptance among financial institutions. Stablecoins are cryptocurrencies that are linked to a “stable” asset like fiat currency or commodities.On Monday, investment banking giant JPMorgan said in a bold statement that Bitcoin could eventually reach as high as $146,000, as it competes with gold as a store of assets.“This long-term upside, based on an equalization of the market cap of bitcoin to that of gold for investment purposes, is conditional on the volatility of bitcoin converging to that of gold over the long term,” JPMorgan said.Its calculation was based on the idea that Bitcoin’s total value would eventually be equal to the $2.7 trillion of total private-sector gold investment.When Bitcoin spiked in late 2017 to $20,000, skeptics said the digital currency had no intrinsic value, and was a bubble waiting to pop. However, JPMorgan said, increased acceptance of cryptocurrencies by financial institutions means that things are different this time. PayPal’s decision in October to allow customers to buy and sell Bitcoin and other virtual currencies using their PayPal accounts was a key factor in Bitcoin’s stellar rise in the past three months.The narrative for Bitcoin has also changed, explained Sagi Bakshi, CEO of Israeli cryptocurrency trading platform Coinmama.Responding to a comment about a dearth of stores that accept Bitcoin, he said: “Bitcoin is not a currency, it is a store of value. Perhaps that was a narrative that was more common a few years ago, but its claims are not very solid. Today, it doesn’t make sense to buy anything with it. The fees are too high, and the system is too slow for high-volume transactions.” Instead, Bakshi says, Bitcoin is an asset class that competes with stocks, commodities, and real estate.The key feature contributing to Bitcoin’s stellar rise is its scarcity, Bakshi noted. “The way that Bitcoin was designed is that there can only be 21 million bitcoins in existence,” he said. “About 88% of them are already in circulation, and four million have been lost forever, because people lost their private keys. Never before has scarcity been built into a digital asset like this that guarantees that there are zero fraudulent coins in the system.“Bitcoin is a revolution that liberates us from the banks and government that took money hostage,” Bakshi said. “We don’t need a third party that will print money when there is an economic crisis. The Fed is printing so much money that the system is going to collapse under hyperinflation. We need a settlement system that is transparent, that allows you to move assets across borders in a way that can be seen by everyone.”While there are Bitcoin funds like the Grayscale Bitcoin Trust that allow people to invest in Bitcoin easily via public markets, Bakshi said there is no substitute for owning Bitcoin directly by buying it through dealers like Coinmama.“It’s like the difference between buying a bar of gold and buying an ETF tracking gold,” he said. Such funds also have not risen as quickly at Bitcoin recently, he added.“In 10 years, you won’t see any currency as we know it today,” Bakshi said. “It will all be digital. Eventually, people will be carrying multiple currencies with them on their phones.”
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