Bank of Singapore Claims Bitcoin Could Replace Gold

The chief economist at the Bank of Singapore has claimed that Bitcoin could replace gold and other safe haven assets as a store of value.

Mansoor Mohi-uddin pointed to Bitcoin’s finite supply and increasing popularity among institutional investors in his research note on the subject. Bitcoin is capped at 21 million tokens and mining difficulty continues to increase, which creates a scarcity of supply.

If demand remains strong, Bitcoin should increase in value. However, Mohi-uddin warned that BTC must overcome several obstacles before it can challenge gold.

“First, investors need trustworthy institutions to be able to hold digital currencies securely, He said. “Second, liquidity needs to improve significantly to reduce volatility to manageable levels.”

Volatility Concerns

Bitcoin increased by around 1,000% in value during a prolonged bull run between March 2020 and early January 2021. It hit a new all-time high of $41,490 earlier this month, but it dipped below $30,000 on Wednesday after conditions proved ripe for a reversal.

It has since rallied somewhat, and it is currently hovering between $31,000 and $32,000.
Several factors may have impacted the price of Bitcoin this week. Janet Yellen was confirmed as the first female treasury secretary in U.S. history on Tuesday, and she had previously fuelled fears of a crackdown on crypto by warning: “I think many are used, at least in a transactions sense, mainly for illicit financing, and I think we really need to examine ways in which we can curtail their use and make sure that money laundering does not occur through these channels.”

She may have been referring more to private coins like Monero, and she has since clarified her stance on Bitcoin, but it still negatively impacted the price of BTC.

The governor of the Bank of England also warned that Bitcoin and other existing cryptocurrencies will not last as technology develops. Andrew Bailey was speaking at the World Economic Forum’s online Davos Agenda, where he warned that businesses would seek out stable and secure digital currencies before fully shifting away fiat currencies.

Bitcoin is arguably not as effective for online transactions as the likes of Bitcoin Cash and Ether, as they are quicker and can be more cost-effective, but – as the Bank of Singapore pointed out – Bitcoin is seen more as a store of value nowadays.

Crowd-Sourcing a Short Squeeze

The other big macroeconomic story of the week is the short squeeze on GameStop, AMC and a few other ailing stocks. Retail investors on Reddit have banded together to take on the hedge funds that shorted these businesses, and they have driven astronomical gains in the value of stocks like GME and AMC.

Many speculative investors have likely been temporarily pulled away from Bitcoin and the crypto market in a bid to make a quick profit by getting involved in the short squeeze efforts, and that could have led to Bitcoin falling slightly in value.

Yet retail investors that bought these stocks could soon sell up and reignite Bitcoin if they end up with large profits amid the chaos.

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