In a report published on January 22, the Bank of Singapore’s chief economist, Mansoor Mohi-uddin indicated that he considers it unlikely that bitcoin (BTC) and other cryptocurrencies will replace the currencies issued by governments as a means of regular change. However, could partially displace gold as a store of value.
Mohi-uddin explains in the document:
Bitcoin’s staggering rally is on par with the major investment booms of the past decades, including gold in the 70s, Japanese stocks are the 80s, The internet in the 90s, the price of oil in the 2000s, and tech companies in 2010. But cryptocurrencies are highly unlikely to replace national currencies as the main medium of exchange in any economy. Instead, digital money could partially displace gold over time, offering an electronic store of value rather than a physical one.
Chief Economist at the Bank of Singapore , Mansoor Mohi-uddin.
The executive highlighted that cryptocurrencies must first achieve people’s trust, overcome volatility, achieve regulatory acceptance and overcome reputational risks in order to have sufficient potential to become a store of value to replace gold.
In this regard, it noted that Investors “need trustworthy institutions” to be able to safely safeguard digital assets. He also stressed that “volatility should be reduced to a level that can be manageable and that in turn improves liquidity.”
The executive believes that to reduce the instability of the bitcoin price they should integrate more institutional, retail and hedge fund investors into the cryptocurrency business. That would “increase liquidity” and prices would be “driven by fundamentals, rather than speculation.”
It also highlights that young people prefer bitcoin and other digital assets over gold, since it can be easily stored in wallets. In contrast, precious metals “are difficult to use for daily transactions and must be stored in secure physical locations,” explains the executive.
Parallels between Bitcoin and gold
The analysis made by the economist establishes also the similarities that, in his opinion, exist between gold and Bitcoin. It specifies that the prices of both are set many times by “investor demand and financial speculation.” It also maintains that bitcoin and some cryptocurrencies have a “limited supply” as does gold.
This argument has already been postulated by other analysts. The management firm of hedge funds SkyBridge Capital is clear that “bitcoin is digital gold, and as such it is better gold than gold.” This is because solves the portability and divisibility problems that make it difficult to use gold as money.
At the end of 2020, SkyBridge estimated that there were approximately 18.5 million bitcoins in circulation and they estimate that within 120 years they will be to mine the remaining 2.5 million of the 21 million total bitcoins to exist, as reported by CriptoNoticias. While onshore gold reserves are currently estimated at around 50,000 tonnes, according to the BBC, a supply that is increasing year on year.
For Mohi-uddin, cryptocurrencies in the future will play a “modest role” as a store of value. However, interest in bitcoin and other cryptocurrencies, especially from institutional investors, continues to grow. In fact, the largest bank in Southeast Asia, Singapore-based DBS Group Holdings, announced in December 2020, the launch of a bitcoin and cryptocurrency exchange, as well as a custody service for retail, institutional and investors. elite, as reported by CriptoNoticias.