Towards a currency crash? "Ultimately, Bitcoin and gold will win against paper money"

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value and an increase in investments by “institutional” players. How to explain such enthusiasm? The economist Philippe Herlin points in particular to "the fear of inflation" caused by the policies of central banks.

$ 51,810.70. That's the value of one Bitcoin on February 18 at 13:59 UTC. A sum that many would have considered delusional a few months ago. It's hard to imagine that in March 2020, less than a year ago, its price had fallen below 5,000 dollars. How to explain such a frenzy ? At the microphone of Sputnik, Philippe Herlin, doctor of economics and specialist in Bitcoin, puts forward a major reason:

“It is the fact that institutions are interested in it that pushes the price up. They take a long time to make up their minds, but when they do, it is with substantial sums. "

Same story with Neil Wilson, analyst at Markets.com, whose AFP echoed: An increasingly marked interest of the business world for cryptocurrencies has transformed the market compared to 2017. "

In recent weeks, a significant number of major economic players have bet on Bitcoin. This is particularly the case of Tesla, a famous brand of electric cars headed by the whimsical billionaire Elon Musk. The company has thus invested 1.5 billion dollars in Bitcoin. On the side of the American MicroStrategy, publisher of business intelligence software, on February 15, a fundraising of $ 600 million was announced "to buy Bitcoins" .

Bitcoin, la ruée des institutionnels dope les cours

Banks are no exception. "A $ 150 billion investment arm of Morgan Stanley known for its prowess in selecting growth stocks is considering adding Bitcoin to its list of possible bets , " Bloomberg said on February 13.

However, the opponents of Bitcoin do exist. They highlight its volatility and recall the very difficult year 2018 that cryptocurrency had experienced. Its price fell from over $ 15,000 in December 2017 to fall below $ 3,000 a year later.

“Institutional investors invest in Bitcoin to stay for several years. We can always see a correction, but I do not believe in a collapse of the course. During the 2017-2018 period, it was mainly individuals who entered the market to make a fortune and quickly left it. The context is totally different today, it is much more stable and long-lasting ”, considers Philippe Herlin.

Especially since according to the expert, "Bitcoin is volatile on the rise, it's less serious than the opposite!"

“When you buy Bitcoin for an investment in two or three years, you are sure to be a winner. Just look at the course history. You just have to be patient and keep your back when times of decline, ”continues the author of J'achète du Bitcoin (Ed. Eyrolles).

According to the economist, volatility is not a problem when we are in a long-term perspective and according to him "Bitcoin is a long-term investment" . “A whole ecosystem is developing around it,” adds Philippe Herlin.

Philippe Herlin is convinced: the price of this cryptocurrency will continue to rise. "There are more and more financial players who consider it" , he underlines.

In recent months, Blackrock, the largest asset manager on the planet, as well as Mastercard, PayPal or the oldest bank on Wall Street, BNY Mellon, have all announced new projects concerning Bitcoin and cryptocurrencies in general.

Even states are getting started. Canada was a pioneer in announcing on February 12 the launch of an exchange-traded Bitcoin fund. It has been licensed by the Ontario Securities Commission (OSC), the constable of the Toronto Stock Exchange. It is an index fund offered by the company Purpose Investments. "This exchange-traded fund will be the first in the world to invest directly in" physically backed "Bitcoins and not in derivatives, offering investors easy and efficient access to the emerging asset class of cryptocurrency without the associated risk. treasury stock in a digital portfolio ” Purpose Investments said in a statement.

"Bitcoin is volatile on the rise, it's less serious than the opposite!"

Journalist Grégory Raymond recently reported on Twitter that the canton of Zug, Switzerland, had authorized its citizens to pay their taxes in Bitcoin, up to a limit of 100,000 Swiss francs. A project also in the pipes of the city of Miami, whose mayor Francis Suarez is a cryptocurrency aficionado. He also wants to pay the employees of the municipality in Bitcoin and invest part of the city's treasury there.

For Philippe Herlin, this bitcoin rush can also be explained by “the fear of inflation” .

“Economic players are realizing that central bank money printing, particularly in the United States and Europe, is reaching crazy levels. This can lead to a price slippage. They therefore protect themselves by buying Bitcoin which is a scarce resource. ”

To counter the effects of the economic crisis linked to the Covid-19 pandemic , many central banks, such as the American Federal Reserve (Fed) or the European Central Bank (ECB), have injected colossal sums into the economy, in particular through asset buyback programs.

Bitcoin and gold should not be “opposed”

All while maintaining a very low interest rate policy. Some, like Philippe Herlin, fear that this orgy of liquidity will lead to an inflationary crisis.

There is another scarce resource that is prized as a safe haven: gold. Unlike Bitcoin, the precious metal is going through difficult times. Since the euphoria of August 2020, when the price of an ounce had for the first time exceeded 2,000 dollars, the price of the yellow metal is down. According to calculations by the specialist site Kitco.com, it has lost more than 10% over the past six months and is now trading below $ 1,800 per ounce.

“It is evident that a number of individuals who were planning to invest in gold have moved to Bitcoin. This may help explain the upward movement in Bitcoin and the downward movement in gold, ”explains Philippe Herlin, author of L'or, un placement d'avenir (Éd. Eyrolles).

Michael Saylor, CEO of MicroStrategy and big fan of cryptocurrency, assured last November that it was going to "eat" the gold.

When the Bitcoin dragon will come out of his den, the first thing he will eat is the kingdom of gold.

An analysis that Philippe Herlin does not share:

“We are dealing with the same asset class. They are obviously very different in their functioning or their history - gold has been present since the beginning of civilization - but they are both rare and limited. "

Indeed, the world production of gold is about 3,000 tons per year when the maximum number of Bitcoins can never exceed 21 million.

“I consider that there is Bitcoin and gold on the one hand and paper currencies on the other. And eventually, Bitcoin and gold will win against paper money. In any case, they will take on more and more importance, ”predicts Philippe Herlin. 

According to him, trade-offs can be made within an asset class, such as choosing between investing in US or German debt depending on market information, political news and the economy. “But that doesn't mean that one will eat the other,” he says. The doctor of economics believes that we should not "oppose" Bitcoin and gold. According to him, "the distribution between the two will depend on the behavior of investors."

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