This week’s bottom-line is gold versus Bitcoin fun strat. Tom Lee who talked to Henry Blodgett two weeks ago and said that everybody has room for alternative currencies in their portfolio. Came without with a note over the past week saying that Bitcoin could be a true substitute for gold. In his note, he builds a foundation for evaluation of Bitcoin that he estimates could go to $20,000 a unit by 2022 which would increase the price of Bitcoin eightfold in the next five years.
His evaluation is based on the assumption that Bitcoin which currently is about fifty-three billion dollars in total to gold. Seven point five trillion the Bitcoin makes up about 0.7 percent of all of the value if you look at what he would call alternative currencies including gold he says that that could go up to five percent and his entire valuation really hinges on that change. So if we unpack that a little bit and we look at the similarities between gold and Bitcoin the similarity and supply is certainly there gold is most of the gold that’s ever been mined is still in existence today and the supply of gold has been growing at about one-and-a-half percent a year Bitcoin has a ceiling built in for the number of bitcoins and as you mind bitcoins they become harder and harder to mine so the supply of bitcoins drop from nine
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percent last year to four percent this year and Lee estimates that the growth rate of the supply of Bitcoin will fall below where Gold’s 1.5 percent by 2020. On the supply side Bitcoin and gold do look a lot alike on the demand side is really the question and Bitcoin does provide a store value like gold and unlike other currencies, it’s not subject to central bank’s increasing the supply and changing the value that way.
But the rest of the demand does bring up an issue timely points to central bank’s which owned 18 percent of gold, however, Bitcoin gold whether or not they’ll actually start buying Bitcoin is a real question and Henry Blodgett has pointed out on this show before that Bitcoin doesn’t really have intrinsic value which we all know that gold does you can take it you can have it deliver it in and do stuff with it. If you think that bitcoin can and will cannibalize some of the money that’s going into gold then there it makes sense to say that there could be huge gains in store but that’s a big if and that’s the bottom line.