With the advent of crypto currencies came an entirely new marketplace that was nonexistent just a decade ago. And as with all new things, once the market started adopting blockchain technology like Bitcoin, everybody wanted a piece of the action.
So much so that prices for Bitcoin and other digital currencies have skyrocketed to the tune of thousands of percentage points over the last few years.
But how high can Bitcoin really go?
To answer this question we must consider this new space in similar light to other speculative investments, and there’s no better person to give us a realistic, unbiased view of this new investing sphere than Rick Rule, the billionaire Chief Executive Officer of Sprott Global Resources. As a long-time advocate of free markets and decentralization from government control, in his recent interview with Crush The Street Rule says that with a $70 billion market cap, and perhaps more importantly the distributed ledger technology that makes it function, Bitcoin and the blockchain are here to stay.
Bitcoin to me is all positive… I’m a consumer of currencies and currencies are a medium of exchange… and the more competing currencies there are the better it is for consumers of currencies… I use U.S. dollars, I use Canadian dollars, I use gold, I use silver, and from time-to-time I use BitCoin.
The more competing currencies, the better the currency has to perform for the consumer.
If you move beyond the discussion of crypto currencies to a discussion of the distributed ledger, that the distributed ledger is perhaps finally the conjunction between information technology and the broader economy… It is the way you to take control of the ownership of assets, the transfer of assets and the title of assets from governments and deliver them back to the market… that’s truly revolutionary.
It won’t be all sunshine, however, despite all of the hype being promoted in the crypto currency community. Many of the blockchain technologies being introduced and funded to the tune of tens of millions of dollars are literally comprised of just a website and an idea. Bitcoin, of course, has a longer track record and is already being used as a mechanism of exchange for goods and services. Nonetheless, warns Rule, like most currencies it is backed by nothing more than market confidence and the faith of its participants:
But the fact that it’s revolutionary doesn’t mean that Bitcoin and all of the other crypto currencies will march every onwards and ever upwards for all time.
The truth is, a situation where six pimply faced 21-year olds in a garage can invent an algorithm and call it a currency, then paint that algorithm with a narrative and then turn it into money means that there will be an enormous proliferation of scams, just like there are in the penny stock business. Billions of dollars will be lost to unsupported narratives.
That does not change the fact that crypto currencies, and more importantly the distributed ledger, are an extremely important factor for our time and a factor that is absolutely for the good in aggregate.
So, how high can we see Bitcoin go?
According to Rule, just as we’ve seen historically with stocks, there will be bull markets, bear markets, bubbles and bursts. But astute investors who position themselves in the right blockchains or companies that operate them could see incredible gains. At the same time, however, he cautions that, at least for now, much of the market is based on speculation:
I don’t know [if it can go to $500,000 or $1 million per Bitcoin]… But I also think it’s possible for the market cap to go to zero if people lose faith in the algorithm… What happens in a market that goes from $450 where it was two years ago to $4500 is people only look in the future to directions gone in the past…
It’s an instrument of faith… Could it go to $10,000? Yes. Could it go to $100,000. I guess. Could it go to $0? Yes. Keep both numbers in mind.
Rick Rule is the CEO of Sprott Global Resource Investments.