Bitcoin (BTC) is set to replicate gold’s explosive breakout of the 1970s as it becomes the world’s “hardest asset” in 2024.
That was a prediction from the latest issue of the Capriole Newsletter, a financial circular from research and trading firm Capriole Investments.
Bitcoin due to big moves “and more” in 2020s
Although BTC price action is almost 80% below its recent all-time high, not everyone is bearish even on the medium-term prospects.
While calls for another decline linger before BTC/USD finds its new macro bottom, Capriole believes 2023 will be bright for Bitcoin as a reserve asset.
The reason, it is said, lies in the financial history of the world economy over the past century, and particularly in the United States, after the dollar completely broke away from gold in 1971.
Gold, then the world’s top safe haven, has seen “huge” gains over the decade, and fifty years later it’s Bitcoin’s turn.
“Because gold was much smaller in the 1970s (and Bitcoin is even smaller today by comparison), it had the ability to make big strides through a decade of inflation and high interest rates,” Capriole wrote.
“It’s one reason why we believe Bitcoin will do the same and more this decade.”
The accompanying charts underscored gold’s potential to repeat its 1970s behavior, including a “cup and handle” chart structure that has been playing out since 2010.
Annotated 1-month chart for XAU/USD. Source: Capriole Investments
When it comes to Bitcoin vying with gold for the safe-haven crown, the potential is in the numbers — at just 2.5% of gold’s market cap, BTC is down 80% from its $69,000 peak last year submerges, little impact on the overall picture.
“Given that Bitcoin is only 2.5% of gold’s market cap today, its 80% drawdown adds just 2% additional drawdown to the combined specie (gold + bitcoin) drawdown,” the newsletter continued.
“This makes for a total hard money drawdown of 24% through November 2022, comparable to the 1970 and 1975 numbers for gold.”
Should the conditions already be in place for a ’70s gold Bitcoin mimic movement, the potential for growth is all the more impressive – even now, Bitcoin’s market cap is only 10% that of gold before the bull run of the time began.
“Bitcoin has more growth potential than gold because it is smaller. Comparable demand in both assets will result in a 40x larger price change for Bitcoin,” Capriole explained.
“The Hardest Good in the World”
Another key argument, long made by commentators like Saifedean Ammous in the popular book The Bitcoin Standard, has been repeated.
Related: Bitcoin price to ‘easily’ reach $2 million in six years – Larry Lepard
There, the debate focuses on investors’ switch to Bitcoin as its inflation rate falls below that of gold, increasing its monetary “hardness” against the metal.
“There are many other characteristics that set bitcoin apart from gold, such as its equitable decentralization, ability to transfer instantly, and being used for micropayments. But most importantly, bitcoin is harder than gold.”
This, Capriole added, will confirm Bitcoin as “the world’s hardest asset” at its next block subsidy halving in 2024.
“All things considered, gold went up 24-fold in the 1970s,” summarized Capriole.
“Now imagine the 2020s when the Fed can’t afford to be that aggressive (the debt is much higher today) and we have digital, accessible, harder money: bitcoin.”
BTC/USD chart showing bitcoin, gold inflation rate data. Source: Capriole Investments
The views, thoughts, and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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