‘Digital gold’: Bitcoin being validated as a store of value

Name: Markets with Madison: Bitcoin v Gold
Uploaded: 2023-11-03T08:30:00+13:00
Description: The price of Bitcoin is up more than 100 per cent this year and has outperformed the price of Gold over a number of years. Larry Lepard explains why he likes both digital and traditional gold as inflation hedges. Video / NZ Herald

By Madison Reidy

Senior Business Journalist, host of Markets with Madison·NZ Herald·

2 Nov, 2023 07:54 PM3 mins to read

The price of Bitcoin is up more than 100 per cent this year and has outperformed the price of Gold over a number of years. Larry Lepard explains why he likes both digital and traditional gold as inflation hedges. Video / NZ Herald

The price of Bitcoin has surged more than 100 per cent this year as growing institutional interest in the digital asset seemingly validates its status as a store of value.

This week marked 15 years since the pseudonymous Satoshi Nakamoto released a white paper for the “peer-to-peer electronic cash system” that aimed to debase the traditional monetary system by removing the need for banks.

Similar to gold, Bitcoin investors deem it a currency that cannot be manipulated by central banks or governments. According to its code, its supply is capped at 21 million tokens.

“You can’t print gold and silver. I view Bitcoin as digital gold,” Equity Management Associates managing partner and Bitcoin investor Larry Lepard told Markets with Madison.

He expected the next run up in its price to hit up to US$200,000, before a drawdown, and after numerous cycles eventually it might be worth up to US$4 million per Bitcoin or more.

For that to happen, though, more investors and governments would need to adopt it and de-dollarisation could need to occur - moves that the United States sovereign debt position would in Lepard’s view accelerate.

“We’ve never had the world’s reserve currency in so much peril,” he said about the US dollar.

“It’s like pouring water in beer, or water in whisky. They’re [investors are] gonna say, screw that s**t, I’m gonna make my own whisky. I want to hold gold, I want to hold silver, I want to hold Bitcoin, because they can’t be diluted.”

He forecast the same shift would push the price of gold up to between US$3000 and US$10,000. It’s currently below US$2000.

Institutional attitudes towards Bitcoin have started to shift, with BlackRock filing for a spot price exchange-traded fund that, if approved by regulators, would see it hold Bitcoin on its books.

Other corporates such as Microsrategy, Tesla and Block already hold it on their balance sheets.

Lepard was part of a camp that believed Bitcoin was unlike other cryptocurrencies, such as Ethereum.

“Bitcoin is a different thing. Bitcoin is actually a legitimate technical development.”

Referencing its volatility risk and apprehension by many retail investors, Lepard said controversies like the FTX saga were to blame.

“Guys like Sam Bankman-Fried and FTX they totally screwed this s**t up. They weren’t really Bitcoiners, they were crypto ponzi scheme grifters.”

Watch the full interview in today’s episode of Markets with Madison above to see how Bitcoin’s performance compares to gold.

Get investment insights from the experts on Markets with Madison every Monday and Friday on the NZ Herald.

Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.

Madison Reidy is the host of New Zealand’s only financial markets show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.