Bitcoin, the open-source currency that is not under any central bank or government control is in the news, again. After rising to a $1,200 high last year, the currency has dipped in value to $364.
Raoul Pal, former manager of global macro funds, made this claim in an interview with Grant Williams on Real Vision Television, “So I said OK well let's assume it's something like gold—There's a finite amount of it that's been mined. The rest is underground. We kind of know how long it's going to take before all the gold is mined or before all the bitcoins. Put them in the same kind of equation we get a value of bitcoin and that value is a million dollars.”
A major concern for investors is the volatile nature of bitcoin’s price swings. Pal said the volatility is okay because the upside is “astronomical” in relation to the downside.
“Now, you'll never hear an analyst say this—but I don't mind this—I could be wrong by 90%, and it's still worth $100,000,” Pal continued. However, he recommended that investors treat it like an option contract instead of investing their life savings into it.
During the interview he also admitted to having worries about central banks printing too much money, and suggested avoiding the bond market.
Although bitcoin news is still relatively new and currently unregulated, Pal did say that he expected central banks to have to regulate bitcoin eventually. Although he continued by saying that would not become a problem.
“What they can't do is destroy it and that's why bitcoin becomes incredibly interesting,” he said.
Pal also share his thoughts on owning gold, suggesting that investors be careful about how they own it. The proliferation of ETFs and derivatives has turned gold into the collateral to highly leveraged metal. He thinks it is best to avoid encumbered, or paper, gold and buy physically unencumbered gold instead.
Although the interview was thought provoking, Pal did not go into an extensive discussion of what makes Bitcoin valuable other than its scarcity.
