Considering the recent price action, it’s been easy for Bitcoin investors to throw in the towel, with data showing that the March 12th crash liquidated hundreds of millions of dollars of BitMEX positions, wiping the accounts of many industry traders.
But, despite this, the conviction of one prominent Bitcoin investor has only increased over the recent crash, adding that he isn’t looking to sell any of his positions.
Bitcoin to Reach Millions?
Although you may not know him Chamath Palihapitiya, CEO of venture fund Social Capital and a former Facebook exec, has been one of Bitcoin’s biggest bulls for the longest time. Aside from Wences Casares of PayPal and Xapo, Palihapitiya was one of the first to suggest that the cryptocurrency could reach a price of $1 million or more.
He confirmed this in a recent interview with Anthony Pompliano of Morgan Creek Digital, explaining that his cost basis in Bitcoin is $80 (meaning he’s up almost 10,000%) and once held 5% of the entire network’s value.
As to why he hasn’t sold his coins and continues to hold them, he explained that he believes the global economy is driving “towards a cliff” whereas there is likely to be a massive deflationary or inflationary event, depending on how governments and central banks act. He believes this cliff, so to say, has the potential to push Bitcoin into a place where it could “emerge as a flight to safety.”
In a deflation scenario, Bitcoin could act as a hedge against the collapse of debt and traditional institutions; in the inflation scenario, BTC’s scarcity would likely allow it to easily outperform the dollar and other fiat currencies.
Although the venture capitalist did not give an exact prediction based on Bitcoin’s potential to reach millions, he said that if one invested in Bitcoin at a 1% conviction that it would become the world’s money, that conviction is now likely closer to 5% to 10% after what has transpired over recent weeks.
He added that the “shmuck” insurance scenario that could play out will transpire over the course of a decade, not the few years that many Bitcoin bulls have started to hope for.
Interestingly, this lines up with the price model from pseudonymous analyst PlanB, which predicts a Bitcoin price of $1,000,000 as the next decade starts to come to a close.
The model, which has been backtested to an R squared of 93%, suggests that Bitcoin’s price can be accurately predicted by its scarcity, defined by the inflation rate.
— PlanB (@100trillionUSD) April 5, 2020
Barriers to Overcome
While the stars are aligning for a large amount of growth in the crypto space, there are some key barriers to overcome.
The former Facebook executive mentioned that as it stands, Bitcoin’s extreme volatility is hampering adoption. In fact, he said that the volatility is pushing Bitcoin into a “ghetto” of day-traders and speculators, deterring a majority of traditional investors. What probably doesn’t help is cryptocurrency is the only market where 100 times leverage is commonplace and easy to access.
Palihapitiya added that if Bitcoin wants to make an attempt at jockeying for some of the U.S. dollar’s market share in the currency market, the volatility will have to go, presumably citing the arguments that if BTC’s purchasing power moves 5% in the space of one transaction’s confirmation time, it wouldn’t work properly as a medium of exchange, let alone as a unit of account.
Not to mention, Bitcoin is not yet usable by millions.
Though, solutions are being put in place, with Square Crypto unveiling the Lightning Development Kit (LDK), which will allow developers to create “custom” integrations of the Lightning Network in an “easy, safe, and configurable way” through an API, demo apps, and other technical tools. Yet, the adoption of this solution still seems to be years away.