Tim Draper: Could Bitcoin Be Generations Ahead of Gold?
In less than five years, billionaire venture capital investor, Tim Draper made $89.1 million from Bitcoin. Despite the bear market, his 2014 investment of $18.96 million in Bitcoin is now worth $108 million. The bearish forces of the markets in 2018 have not waned his spirit. He appears as confident as ever, even suggesting that Bitcoin could be a better store of value than gold.
Tim Draper on Bitcoin vs. Gold
In 2018 Mr. Draper asserted that Bitcoin would be $250,000 by 2022. This figure may be considered reasonable—a total of 21 million Bitcoin will only account for 5% of global GDP at that rate. Mr. Draper argues there will be a capital flight from fiat to crypto over time. Over time, cryptocurrencies could eclipse fiat by 1,000 times.
As engineers and technical team members make it easier to spend Bitcoin with new solutions, adoption could increase as it becomes easier for different individuals to build it into contracts. A “five percent market share of all the world’s currencies” could be achieved.
Bitcoin vs. JPM Coin
The bank’s resources could back JP Morgan’s digital token, JPM coin, which some may believe to be a more reliable and tangible source of value than Bitcoin’s “invisible money.” Mr. Draper and others may beg to differ on its prospects for success over Bitcoin. With time, the market value of Bitcoin could be established, and price volatility may reduce.
1% of Gold’s $8 Trillion Valuation
Despite paling in comparison to Gold’s $8 trillion market capitalization, former Goldman Sachs partner, Mike Novogratz suggests Bitcoin could eventually catch up over 20 years. He suggests it could be a small portfolio bet. With big players like Fidelity and Bakkt joining the markets, it could be a matter of time before the bullish winds push values to seemingly unprecedented levels.
With respect to alt coins, Mr. Draper says alt coins are still going through development. The alt coins that will be around for a long time are already rising to the top (in terms of market capitalization). Their impact on the world’s economy could be significant. He suggests that looking at those behind cryptocurrencies can help in determining whether to hold a cryptocurrency.
History Repeats Itself?
Gold’s 7000-year history speaks volumes of the reasons for its high valuation. Central banks (6%), investment (30%), jewelry (54%), and technology (10%) have driven demand. Seasonality of trades is also more easily identifiable as sales tend to increase in January, February, July, and August when viewing average returns over a 5 to 10-year timespan. In contrast, Bitcoin’s pattern of demand is significantly harder to figure out, if at all. There has, of course, been more time for observation of patterns of demand for gold.
Additionally, technology plays a significant role in improving the value of Bitcoin. Gold, on the other hand, is a bit more complicated in this regard. Technology may even pose a risk of reducing price as it increases supply.
Bitcoin has utility as a currency whereas gold does not. It is not the first digital medium of value transfer, and clearly, it is not the last.