One might be forgiven a case of déjà vu. Just as during Bitcoin's previous bull run, while the price of Bitcoin (BTCUSD) races past new records, commentators and proponents are, again, weighing in with sky-high valuations for the cryptocurrency.
Scott Minerd, chief investment officer (CIO) at Guggenheim Partners, recently told Bloomberg that the firm's valuation models suggest that Bitcoin could go as high as $400,000. As of this writing, Bitcoin is changing hands at $22,954. Thursday morning, it whizzed past the $23,000 mark and peaked at $23,653, setting a new record in the process.
Guggenheim Partners does not own Bitcoin. But it has reserved the right to set aside as much as 10% from its $5.3 billion Macro Opportunities Fund to invest in Grayscale Bitcoin Trust (GBTC), a Bitcoin holding company that trades in OTC markets. An increase in Bitcoin price will propel GBTC's share price upwards and generate profits for Guggenheim. The investment firm has been monitoring Bitcoin prices since it was valued at $10,000, said Minerd. "Ultimately, we are going to buy it," he promised.
- Scott Minerd of Guggenheim Partners says a Bitcoin could be worth $400,000, based on the firm's valuation model that takes into account the cryptocurrency's scarcity and inflation of the dollar.
- CoinFund's Seth Ginns has predicted a $1 million valuation for Bitcoin based on Its four-year halving cycle.
For now, though, Minerd is preaching the Bitcoin gospel and justifying a high valuation for the cryptocurrency. "It's based on the scarcity and relative valuation such as things like gold as a percentage of GDP. So … Bitcoin actually has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions," he said.
According to Minerd, the Fed's policy of "rampant money printing" during the current pandemic-induced economic downturn was another reason for the valuation. The Federal Reserve has pumped as much as $9 trillion into the U.S. economy since the pandemic's start. The noisy whirr of the Fed's money-printing machine is a contrast to Bitcoin's capped supply of 21 million. The resulting scarcity is supposed to make the cryptocurrency a store of value.
To the $1 Million Moon?
At Bitcoin's current price, Minerd's price estimate might seem outlandish. But CoinFund's Seth Ginns left that estimate in the dust by forecasting a $1 million price target for the cryptocurrency. He said the "pattern recognition" of Bitcoin’s four-year cycle, presumably the duration between its halving periods, meant that a price range of between $150,000 and $400,000 was a "base case."
Ginns also made an improbable comparison between the share price movement for electric car maker Tesla, Inc. (TSLA) and Bitcoin, saying that the cryptocurrency’s rapid institutionalization could propel it to toward a range of $500,000 to $1 million in the next two years. Thereafter, its price would consolidate, he said.