Bitcoin has increased in value by $150 in just three days, reaching an all-time high of $1,222 yesterday, now standing at slightly above $1,200. Likewise, gold has risen by around $100 since December, currently standing at $1,253.
Except for a brief period earlier this year, when only Chinese exchanges momentarily surpassed gold parity, one bitcoin has never been more valuable than gold, nor has bitcoin ever maintained its price above it, but is that about to change?
It’s difficult to predict the future, but this recent rally is probably led by anticipation over the COIN ETF. Michael Piwowar, a Republican economist and acting chair of the SEC, together with Kara Stein, a Democratic lawyer and commissioner at the SEC, are to decide by the 11th of March whether to approve or reject the bitcoin ETF.
The law defaults on approval. If no decision is made in the next two weeks, the ETF will go live, but they can, at any point, between now and the 11th of March, reject it.
For them to do so, there would have to be some good reason to diverge from the law’s default answer of approval. Some have suggested security as a concern, but the twins have stated the coins are to be held in airgapped computers within secure and different locations. As for volatility, there are plenty of ETFs far more volatile and dangerous.
It is a very risky investment, but for a non-technical person, it is far less risky than buying and securing the coins directly. In any event, potential investors would be made fully aware of any risks, thus providing them with all necessary information to judge their comfort levels.
A pensioner would probably prefer to invest in Coca Cola, but a late 20s or early 30s investor might wish to take some high risk with a small portion of his portfolio. For them to be denied this right, there must be some very good reasons.
Personally, I see none. Nonetheless, I might be wrong and it might be rejected, but the prediction market has now risen to a 47% chance of approval.
If it is approved, hundreds of millions are expected to pour in during the ETF’s first week. This is expected to increase bitcoin’s price to around $3,000, a pretty stratospheric number. If it is rejected, price would likely tank as the new money that has come in, anticipating an approval, exits.
This new money is trying to price in a potential approval while bearing in mind a potential rejection, weighing the odds, and placing their bets. Technical Analysis suggests a target price of around $1,600, a doubling from $800, which seems about right. From there on, we either moon to $3,200 or doom.
As such, unless we hear anything further, we probably will surpass gold parity while waiting for the ETF, but as they say, making predictions is very difficult, especially when they concern the future.
The opposite of everything I’ve said might happen, or something completely different. To know for sure, we have to wait.
Image from Shutterstock.
Last modified: May 21, 2020 10:02 AM