Bitcoin and gold bars are more similar than expected. You can use them to protect your savings from inflation. The picture shows gold bars and Bitcoin coins.
Thomas Fitzpatrick, the managing director of the Wall Street giant Citibank, has written a detailed report entitled „Bitcoin: 21st Century Gold“ for the bank’s institutional clients. In the report, he highlights the similarities between the 1970 gold market and Bitcoin.
Citibank Managing Director compares the Bitcoin price trend with the 1970s gold market
Fitzpatrick’s report was first published in a tweet on November 14th by a crypto enthusiast named Alex (@classicmacro). The report notes that Bitcoin’s entire existence has been characterized by impressive price jumps followed by strong sell-offs, and this is „exactly the kind of pattern that maintains a long-term trend.
An agreement signed between 44 countries after World War II led to the pegging of the US dollar to gold and other national currencies to the US dollar. But in 1971 the Nixon administration broke the relationship between gold and the US dollar, ushering in an era of fiscal irresponsibility, inflation and deficits. With the new policy, after 50 years of trading, the price of gold rose significantly in a narrow range of $20 to $35.
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Central banks let Bitcoin blossom
The Managing Director of Citibank further noted that Bitcoin’s first bull market from 2010 to 2011 was reminiscent of the gold market in the 1970s.
The report said:
The Bitcoin price movement happened in the aftermath of the Great Financial Crisis of 2008, which brought about a new change in the monetary system, when we went to zero percent interest rates (negative in some countries) and massive QE.
Fitzpatrick cites the corona crisis and the central banks‘ willingness to kick-start the „money printing machine“ as some of the fundamental catalysts that could probably send Bitcoin skyrocketing past its old record.
Governments around the world have claimed that they are willing to keep up with the massive printing of money until GDP and unemployment recover – and that bodes well for crypto currencies like Bitcoin.
Fitzpatrick believes in USD 318,000 per BTC by December 2021
The Citibank Board of Directors also draws attention to the weekly chart of the Bitcoin price and the four-year bull and bear cycles starting in 2011. Based on Fitzpatrick’s analysis, the price of Bitcoin has been somewhat symmetrical, creating a „very well defined channel“ that predicts an upward movement in the same time frame as the previous bull market.
Such an argument would suggest that this movement could possibly peak in December 2021, at the high of the channel, suggesting a movement of up to $318,000.
While some might say that $318,000 seems unattainable given Fitzpatrick’s poor track record in forecasting, others note that this is another turning point for Bitcoin.
The first crypto currency is becoming increasingly relevant
Bankers are becoming increasingly optimistic about the Bitcoin price. Just last month, JPMorgan analysts released a report indicating that Bitcoin’s long-term upside potential is „substantial“ as it now competes with gold as an „alternative“ currency. According to JPMorgan, Citibank is the latest traditional banking institution to take an optimistic stance on the dominant crypto currency.
In addition, a large US bank that estimates US$318,000 as a target for Bitcoin for its institutional clients is insanely optimistic. Nevertheless one may not forget at this point that this is for the time being the opinion of Thomas Fitzpatrick, who is after all Managing Director at Citibank.
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