Bitcoin eyes $50k until the end of 2021 amid alarm bells

Is Bitcoin a mind-blogging investment or merely fool’s gold? Undeterred by such grave scepticism raised by some eminent economists on its sustainability and intrinsic value, the world’s most popular cryptocurrency has been predicted to continue its relentless bull-run until the end of 2021 with its price soaring to $50,000 per coin.

The cryptocurrency, which hit a record high of $19,860 surpassing its former ceiling of $19,783 posted in December 2017, is expected to maintain its propensity to advance in price into 2021, with macroeconomic, technical and demand versus supply indicators supportive of $50,000 target resistance, implying about a $1 trillion market cap,” Bloomberg Crypto noted in its monthly report.

The exorbitantly bullish outlook for the digital currency comes amid blistering salvos fired by renowned economists including Nouriel Roubini, nicknamed “Dr Doom” for his famously pessimistic predictions, and former White House chief economic advisor Gary Cohn about its inevitable collapse.

“It has no intrinsic value, it is not backed by any asset, it is not legal tender, it cannot be used to pay taxes,” said Roubini. Roubini, who predicted the global financial crisis of 2008, also raised an environmental argument against the power of POS, or proof of stake, that comes with being able to mine more bitcoins because it consumes immense amounts energy.

Compared to stocks, bonds, real estate, and other income-generating assets, there’s no intrinsic value to be found in Bitcoin, argued Roubini, pointing out that crypto exchanges were also riddled with questionable trading practices, such as “pump and dump.”

Cohn, who also served as president and chief operating officer of Goldman Sachs for 26 years, said Bitcoin is potentially a developing asset class. “And for all the reasons it’s a strong developing asset class, it may fail.”

He explained that “part of the integrity of an asset class or part of the integrity of a system is knowing who owns it, and knowing who has it, and knowing why it’s being transferred. And is it being used for legitimate causes, is it being used for good, or is it being used for illegitimate causes, is it being used in corrupt practices in corrupt ways?”

Cohn asserted that the bitcoin system today has no transparency to it. “So there are a lot of people that question why would you need a system that does not have an audit trail, does not have integrity, you don’t know who owns it, you don’t know exactly how much exists today, how much has been mined, how much has been lost, how much has been thrown away on hard drives because they don’t exist anymore.” Bloomberg analysts believe that the demand-supply mechanics are currently skewed bullish, as only 900 new coins are mined each day compared with 1,800 in 2017, and institutional participation is increasing.

They pointed out that assets under management at Grayscale Bitcoin Trust recently breached the $10 billion level, having begun the year at $2 billion. The trust has bought nearly 70 per cent of new bitcoins mined since May 11, when the cryptocurrency underwent its third reward halving.

As per data source Skew, open interest in the bitcoin futures listed on the Chicago Mercantile Exchange has risen above $1 billion for the first time on record compared with closer to $120 million in 2019. Bloomberg analysts said they expect these trends to continue in 2021 because major central banks and governments are unlikely to scale back or halt their inflation-boosting stimulus programs anytime soon. The unconventional policies adopted by authorities to counter the coronavirus-induced slowdown have boosted demand for bitcoin and gold this year.

— issacjohn@khaleejtimes.com