Famous cryptocurrency investor and founder of Aike Capital, Alex Krüger tweeted on January 1 that the relationship between Bitcoin and gold should be examined more closely.
2021 could be the year of central banks Bitcoin
Krüger says central banks (CB) will hold Bitcoin sooner or later. He says it’s because of gold and how central banks treat it.
In a series of tweets, Krüger shows how demand for gold has changed in 2020.
I've changed my mind.
Major central banks will eventually hold #Bitcoin as a reserve asset.
So let's explore how central banks' gold demand looks like 👇
— Alex Krüger (@krugermacro) January 1, 2021
Krüger begins by showing that central banks’ demand for gold has remained stable over the past decade. However, he adds that it is very low in 2020. He also points out that the addition of liquidity drives gold prices up.
Without going into detail on why CBs are cutting gold purchases so much, Krüger points out that institutional investors dominate demand in 2020. On the other hand, commodity declined as demand was price sensitive.
At this point Krüger makes an assumption:
If central banks buy Bitcoin with only 5% of their gold demand, it will increase demand by over $ 1 billion. Krüger sees the first central bank entry as an event with some consequences.
Prices will rise above the news and speculators will accumulate. But for central banks, the demand for gold will only increase. Jorge Schneider says:
Small becomes a tidalwave…
— Jorge schneider (@Jorgeschneide64) January 1, 2021
Will CBDCs be the killer of BTC?
Could Krüger create a situation for central banks holding Bitcoin? Central Bank Digital Currencies (CBDCs) are on the horizon. But are they a Bitcoin killer?
Regarding CBDCs, the answer is that they probably weren’t BTC killers. In fact, there is a possibility of a digital stablecoin coming. However, the goal of most CBDCs currently being tested is to create a viable trading tool.
China is testing the digital yuan for retail purchases. The pilot launch for P2P transfers started in December. So far, the European Central Bank has declared the same thing: Digital currencies expand our ability to trade.
However, Bitcoin seems more like a store of value than anything else. The 2020 bull run wasn’t about buying pizza or coffee with Bitcoin. It was partially linked to the growing interest long anticipated by institutional investors such as GrayScale and MicroStrategy.