An independent report by the Managing Director of Citibank describes Bitcoin as the digital gold of the 21st century.
The constant devaluation of the world’s current reserve currency – the US dollar – forms the basis of this argumentation.
The report points to clear analogies between the 1970 gold market and Bitcoin.
History of money and gold
The 1970 bull market in gold was launched in 1944. After the Second World War, forty-four countries signed the Bretton Wood Agreement, which shaped the global currency market until 1973.
This agreement pegged the US dollar to gold and all other currencies to the dollar. It attempted to establish a regime in which the US dollar was equivalent to gold as a reserve currency.
And the USA was quite successful in realizing this vision.
However, with global industrialization and the inflation of the US dollar, the preference for gold and other currencies began to grow. This triggered a gold rush in 1970, when people began to exchange their bills for the precious metal. In 1971, US President Richard Nixon broke the link between greenbacks (US dollar notes) and gold and this then led to the emergence of the Fiat regime we know today.
With the resulting relatively free currency market, the price of gold rose enormously over the next 50 years.
Currency inflation and the devaluation of the greenback form the basis for Fitzpatricks’ comparison of Bitcoin to gold. The report says:
“Bitcoin was created in the wake of the great financial crisis (of 2008), which brought about a new change in the monetary system when we switched to zero percent interest rates.
Fitzpatrick points out that Bitcoin’s first bull cycle from 2011 to 2013, when it rose 555 times, is a result of this.
Currently, the COVID 19 crisis and the associated monetary and fiscal responses of the government are creating a market environment similar to that for gold in the 1970s. Governments have made it clear that they will not shy away from unprecedented printing of money as long as GDP and employment figures do not rise again.
The above analysis is music to the ears of every Bitcoin enthusiast. What has often been preached in the crypto forums is finally becoming reality.
Hyberbullish Bitcoin targets
But Fitzpatrick is not stopping there; his price forecast chart shows the Bitcoin price at $318,000 by December 2021.
The four-year bull and bear cycle after 2011 and the ascending parallel channel since 2013 forecasts growth of 102 times from the low of $3,200 in 2018 to December 2021.
“The price movements over the last seven years have been very symmetrical and have formed a very well defined channel that will allow us to follow an upward trend similar to the last rally (in 2017)”.
Bitcoin prices will most likely appear exaggerated to traditional investors. Nevertheless, the basic theory of a paradigm shift in the global currency market is not new. The US economist Ray Dalio (https://de.wikipedia.org/wiki/Ray_Dalio) has indicated the devaluation of the US dollar and also a paradigm shift.
Bitcoin could be the missing piece of the puzzle in this new paradigm.
In addition, the mere fact that such a Bitcoin price target is issued to the institutional clients of the largest American bank is very positive.