Bitcoin towards 400,000 USD as a risk free reserve asset

By: Bharggavi Ssayee

March 29, 2021 2:01 PM

$100K, $200K or $300k? The forecasts are multiplying for Bitcoin. Bloomberg Intelligence even expects $ 400,000 in 2021. BTC would benefit from the desire of institutions to protect themselves against the depreciation of the dollar and inflation.

The Bitcoin halt does not dampen the most optimistic forecasts. For Pantera Capital, Bitcoin could reach $ 100,000 within a few months, in August. Other observers go even further.

This is particularly the case with Bloomberg Intelligence. And his analysis may surprise. While Bitcoin is viewed by many as too volatile, its expert Mike McGlone nonetheless considers cryptocurrency to increasingly resemble a risk-free asset for investors.

Bitcoin in transition to a "risk-free asset"

Based on this hypothesis, he estimates that the value of Bitcoin could rise to $400,000 in 2021. “On course to become a global digital reserve asset, a maturation jump in 2021 could cause Bitcoin to evolve towards a active without risk, in our opinion, ”he wrote.

This forecast therefore goes beyond those extracted from the stock-to-flow model, very often applied during the BTC. And according to the latter, the value of the crypto-asset averages around $ 288,000, but over a longer period - from 2021 to 2024.

To reach these estimates, however, Bitcoin must rally a larger number of investors, especially institutional ones. However, this adoption comes up against an obstacle. Bitcoin's volatility is presented as a factor in increasing the risk level of a portfolio.

Bloomberg Intelligence therefore starts from the premise that BTC mitigates risk rather than promoting its rise. JPMorgan does a radically different analysis, although it is not shared by companies like Tesla or MicroStrategy.

Too volatile, therefore too risky, retort analysts

"The main problem with the idea that big business treasurers will follow Tesla's lead is Bitcoin's volatility," its experts said in a February investor note. For them, cryptocurrency remains a risky investment.

Can volatility and low risk go hand in hand? This is certainly not the opinion of the boss of the US Fed. Jerome Powell believes that cryptocurrency cannot be "really useful as a store of value" due to its unpredictable nature.

The leader considers cryptocurrencies to be risky assets. And he cautions investors in this regard. “I think with cryptoassets the public has to understand the risks,” he said recently.

At the start of the year, the director of strategy at Morgan Stanley bank drew up a comparison. Bitcoin's average annual change is 69%, compared to 27% for silver, 13% for gold and around 20% for stocks. But these fluctuations recede over time.