Bitwise Analyst Says Bitcoin Following Gold’s Volatile Path to Global Dominance
The head of research at Bitwise, Matt Hougan, says Bitcoin is behaving the same way gold did back in the 1970s, when it shot up 1,365% in the course of a volatile decade.
Hougan penned an article at Forbes outlining the similarities between the rise of BTC and gold’s prior price history.
“The 1970s was, of course, when the U.S. abandoned the gold standard. At the time, people didn’t know what to make of gold. Would it succeed as a ‘safe haven’ asset, untethered from the dollar, or be cast aside as a ‘barbarous relic,’ as John Maynard Keynes once called it? The result was a period of significant volatility, as the two forces argued back and forth.”
According to Hougan, Bitcoin’s trademark volatility is essential, as the leading crypto battles to earn trust and establish itself as a solid store of value.
“It was exactly this risk, however – the possibility that gold could be cast into the dustbin of history, like cowry shells and other forgotten stores of value – that led to gold’s volatility and strong returns. As evidence mounted that gold would in fact continue to serve as a safe haven, returns spiked and more investors made gold a part of their portfolios. That same process is taking place in Bitcoin today.”
Considering its volatile nature, the question of whether Bitcoin will soar or struggle in the midst of a global financial crisis remains.
In a new interview with Bloomberg, Blockchain Capital general partner Spencer Bogart says he believes Bitcoin is emerging as a safe-haven asset.
“I think longer-term Bitcoin will absolutely be a safe haven. I mean as it grows up the adoption curve, we see Bitcoin kind of evolving as it goes. So I think right now it is kind of in this intermediate state right now where you really have to think what the risks are and how severe are they.
So I think that when you have looming risks of monetary devaluation, things like this, Bitcoin certainly looks very attractive, and I think that was a large driver of the recent run-up in price.”
But despite his bullish take on Bitcoin’s ability to become a digital alternative to gold, Bogart says BTC may not fare so well in a major global financial crisis as traders pull liquidity out of more speculative assets.
“When you think about really severe crises taking place, a liquidity crunch, another global financial crisis, I think that Bitcoin will struggle to do very well from a price perspective.
Now, I think it will continue to work well from a utility perspective and Bitcoin can withstand bank closures, etc. and continue to function very well. But longer-term, I think it’s going to continue to evolve into that safe-haven status. I think Bitcoin’s going to be worth a lot more in two to five years from now than it is today. The exact price trajectory over the next six months is to be determined. I’m not convinced that we have a full economic crisis on the horizon right now.”
Historical data from GoldSilver compares gold and silver to the S&P 500 during major downturns.
While gold has a tendency to rise during periods of economic instability, it remains to be seen how the world’s most popular cryptocurrency, just 10 years old, will perform during a global financial crisis.