The world’s largest cryptocurrency, Bitcoin, witnesses a prominent surge in its prices as it is trading above $40,000. The renowned billionaire, venture capitalist, the founder and CEO of Social Capital venture capital firm, Chamath Palihapitiya, has described bitcoin as a hedge against global uncertainty.
In an interview with CNBC, Palihapitiya cited a potential five or ten-year time horizon before Bitcoin would possibly hit $200,000 in value. He states that this was partly owing to the lack of trust in governments. The governments around the world have employed several measures to diminish the economic impact caused by COVID-19 pandemic.
For instance, the U.S. has mass-printed fiat for stimulus packages and economic relief, triggering a depreciation in USD. Compared to the dollar, Bitcoin has different underlying fundamentals that are not affected by the coronavirus’s financial and health situation. Considering the leading cryptocurrency is borderless, it enables holders to manage their funds independently with no centralized authority. It has also been promoted as a hedge against inflation by numerous market bulls.
Chamath Palihapitiya on Bitcoin as a safe haven
Fidelity Digital Assets investment company issued a report explaining Bitcoin’s lack of price association with other mainstream financial assets like stocks and gold. Palihapitiya states that Bitcoin will transition to something much more substantial eventually; however, right now, Bitcoin is in its adoption stage.
Bitcoin serves as a hedge against uncertainty. Typically, uncertainties are circumstances where one cannot calculate the odds. Unqualifiable uncertainty, like the increase in inflation, can be hedged against with Bitcoin. The leading cryptocurrency has features that make it an excellent safe-haven asset. First, it has a high degree of approachability. It enables anyone to send and receive funds in a permissionless way. On the other hand, fiat currencies are subjected to a high degree of risk as they depend on third-party custodians to check their transactions. Secondly, the fixed cap of Bitcoin supply at 21 million BTC decreases the uncertainty affecting all fiat currencies that rely on central banks’ monetary policies.
Moreover, crypto has seen a significant adoption since the beginning of 2020, involving extensive players gaining interest in BTC. However, some influential financial figures like Shark Tank’s Kevin O’Leary still doubt Bitcoin, indicating regulation as a potential issue.
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