Komal Joshi · Dec 1, 2020 . 6min read
CitiBank’s MD posits that Bitcoin’s historical price correlates with Gold in 1970
Tom Fitzpatrick, Citibank's MD, chalks out similarities between Gold and Bitcoin post-Bretton wood era.
By Victor Ugochukwu · Nov 16, 2020 . 7min read
The Managing Director of America’s fourth-largest banks in a recent report “Bitcoin: 21st Century Gold” opines that Bitcoin’s price action over the years bears similarities with Gold especially during the boom in the 1970s.
Tom Fitzpatrick, who is also an expert currency trader of Bitcoin and Gold, draws an analogy from a nuanced perspective between the Second World War and Post Dollar-Gold pegged era.
During the Bretton Wood Agreement where 44 countries after WW2 (World War 2) came together and agreed to the Gold Reserve currency system. They set the value of the dollar to be pegged to Gold while other currencies are pegged to the dollar. In a nutshell, the dollar which became the global reserve, was derived its value based on the valuation of Gold. This would then go ahead to lay the foundation for which the Gold boom of the 1970s happened.
As the waves of industrialization swept through Europe and other regions, the demand for Gold as a precious metal surged. The preference for swapping dollar bills as well as other currencies for Gold led to Gold-Dollar peg as it was apparent of imminent global inflation. President Richard Nixon of the United States ushered in a new Fiat Era which is still in operation till date when he broke the ties between Gold and the dollar in 1971.
Bitcoin price follows the historical pattern of Gold price post-Bretton Wood era.
As the world now operated a free currency market rate, Gold price increased for the next half-century. And it is that nexus between the monetary inflation and dollar devaluation that Fitzpatrick hinges his opinion on. According to publication by Cryptobriefing, Fitzpatrick said
“Bitcoin move happened in the aftermath of the Great Financial crisis (of 2008) which saw a new change in the monetary regime as we went to ZERO percent interest rates.”
Since Satoshi created Bitcoin in 2009 at the peak of the global recession, the new “digital gold” has experienced some major bull runs. Fitzpatrick points out that the bull run between 2011 and 2013 which saw Bitcoin shooting up by over 500 times was akin to Gold’s post-Bretton Wood era.
At the moment, some major economies are yet to begin to recover after taking severe damage from COVID pandemic. The United States is doling out stimulus package from just printing more dollar bills out of thin air. It’s apparent that the next wave of inflation may bite harder. Basically, whenever there’s a call for more fiat printing, Bitcoin enthusiasts believe their arguments have become stronger. They argue that bitcoin is the ultimate hedge against poor monetary policies and collapsing fiats.
Bitcoin price target for $20,000 may be a child’s play.
The calls for Bitcoin to close December above $20K are getting stronger with the bullish trend the industry experiences lately. Tom Fitzpatrick, for instance, projects Bitcoin to hit $318,000 by December 2021. That would be over 1860% price movement.
Although some may consider this a wild call, however, there’s no doubt in the paradigm shift in the global currency market. The projections are that it may happen again with the trajectory that the dollar follows currently. If that happens, then BTC would be fulfilling a strong purpose in history as a hedge.
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