VanEck has published an analysis of potential bitcoin and gold prices following the impact of Russian sanctions. It predicts that there could be a significant upside for both assets if a new paradigm of money is set to form.
Executives from asset management firm VanEck say that bitcoin’s price could be anywhere between $1.3 million and $4.8 million, as implied by global M0 and M2 money supplies. The executives published an analysis of how bitcoin and gold could be impacted as potential reserve assets due to the sanctions on Russia.
The implied price of Bitcoin using the same aggregate M0 that we used for gold is around $1,300,000 per coin.
Saying that money has changed, they believe that the sanctions on Russia have reduced the demand for hard currencies, instead of shifting the focus to former reserve currencies like gold — or the new age digital gold that is bitcoin. To that end, they say that “the bottom line is that the upside for gold and Bitcoin is potentially dramatic” with “potential Bitcoin prices of around $1,300,000 per coin.”
The executives applied a framework of dividing the global money supply, M0 and M2, by global gold reserves. The analysis reads,
“The money liability is divided by the reserve asset. We used current reserve holdings in troy ounces for gold, and we used the current exchange rate to convert the monetary base liability into U.S. dollars. We use base money because the econometrics are good (globally), and it’s understandable – it’s just currency-in-pocket/circulation and demand-deposits.”
They calculated the global price of BTC and divided it globally. Of course, the predictions are predicated on the reasoning that bitcoin could become a reserve asset. They also note that the upside of crypto is much higher than gold, at 33x for crypto compared to 16x for gold.
Could bitcoin really reach over $1M with regulations?
The prices speculated on by the VanEck analysis are just that — speculation — and the executives admit that it can be challenging to quantify its effect on assets like bitcoin and gold. It does conclude that there is a huge implication, i.e., a potentially significant upside, for bitcoin and gold.
However, those eye-watering prices would be phenomenal, even though bitcoin has made an incredible rise over the years. There is a long way to go before the cryptocurrency reaches those prices, though the market is still in its early years and regulation is still forming.
Authorities around the world are cracking down on the market, from imposing taxation to demanding strict compliance measures. Some of these regulations will bring some order to the market, but some may just impact the market heavily.
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