Famed blockchain investor and Aike Capital creator Alex Krüger tweeted on Jan. 1 that the bitcoin – gold partnership requires a closer look.
Central Banks (CBs) will carry bitcoin sooner or later, says Krüger. The explanation, he claims, has to do with gold and how central banks manage it.
In a sequence of tweets, Krüger reveals how the market for gold shifted in 2020.
Habits Are Hard To Break
Krüger continues by demonstrating that central bank demand for gold has been stable for much of the last ten years. However, it declined significantly in 2020. He also draws attention to the fact that adding liquidity contributes to higher gold prices.
So, who’s buying gold? Without going into depth as to why CBs cut their gold consumption so much, Krüger points out that institutional investors led demand in 2020. Jewelry, on the other hand, dropped because demand is price sensitive.
The Big ‘If’
At this point, Krüger makes an assumption. He tweets:
If CBs buy into Bitcoin with only 5% of their gold demand, it will boost demand for the leading crypto by more than $1 billion. Krüger sees the entry of the first CB as a case of many implications.
Prices would jump on the news, and speculators would rush in. However, CB’s demand for gold will only increase. As Jorge Schneider said:
Can Krüger Make a Case for It?
Will Krüger make a case for the bitcoin owning central banks? The Digital Currencies of the Central Bank (CBDCs) are on the horizon. But are they a bitcoin murderer, huh?
As far as CBDCs are concerned, the response is that they are definitely not bitcoin murderers. In reality, there is a chance that a digital stablecoin could come out of it. However, the goal of most of the CBDCs currently under testing is to establish a viable means of transactions.
As BeInCrypto has announced, China is now testing its digital yuan for retail transactions. The pilot launch of P2P transactions began in December. So far, the European Central Bank and others have announced the same thing: digital currencies are growing our ability to make transactions.
Bitcoin, though, tends to be a store of value rather than anything else. The 2020 bull run wasn’t about having a bitcoin pie or coffee. Much of it was due to the long-anticipated increased involvement of retail and business investors such as GrayScale and MicroStrategy.
Is Krüger right about CBs investing in bitcoin for five years? Or maybe this year, too? Institutional investors have taken years to become pro-crypto investors. Only time will say if this store of value is indeed interesting for the mother of all buyers.
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