The Winklevoss twins —the founders of the regulatory compliant Gemini, are convinced the U.S. dollar is no longer a reliable store of value. Instead, their confidence is on Bitcoin.
Gold and Oil as Store of Value Assets
On Aug 27, the Winklevoss twins penned an article detailing why the digital asset may rise to $500k a pop, marking the end of the greenback, oil, and gold as leaders and preferred vehicles of storing hard-earned value.
For eons, gold and oil, despite being commodities, were considered assets during which when the economy is in turbulence, investors and even governments could find refuge.
Recent crises, for example, continue to support this direct effect, with gold specifically outperforming the traditional stock market for an inverse correlation.
Meanwhile, the USD pinning its strength and reliance on the proper management by the Federal Reserve and the robustness of the U.S. economy became a staple, a reserve currency denominating international trade.
The Federal Reserve Mismanagement of the USD
However, it is events over the last decades that have called into question the position of the USD as a truly reliable and fitting reserve currency.
The Winklevoss twins argue that the position taken by the Federal Reserve especially in the face of the recent coronavirus-induced crisis went against the grain, and is opposite of what Keynesian economists demand.
Instead of running surplus during one of the longest stock market bull run in U.S. history, the Federal Reserve continued to “pound the turbo”, slashing rates, and “spending money like a drunken sailor.”
Worse, Tyler exclaims, the government has been irresponsibly printing money. Because of their largesse in the last decade, the Federal Reserve hands were tied and had to print more money in the last five months.
This increased the amount of USD in circulation to $3 trillion all thanks to helicopter money through the CARES Act, and other propping measures to stimulate the economy through QE.
The Inevitable Hyperinflation
Faced with likely hyperinflation, the Winklevoss twins are understandably backing Bitcoin. He laid out several of bitcoin’s attributes which places it a candidate to take over gold as a store of value and a hedge against inflation.
They mentioned Bitcoin’s fixed and deterministic supply as an appealing reason with a guarantee that there will be no supply shocks in the future.
Other than this, BTC—unlike gold, is highly divisible, remains fungible—just like money, is digital, and is hard to forge.
Bitcoin to $500k
With all this, Bitcoin as decentralized money from a white paper to an over $200 billion juggernaut in roughly a decade.
Gold may have a millennia head start and a strong foundation of trust, but in the face of uncertainties and purchasing power weakening inflation, BTC is at spot rates likely undervalued 45X. A BTC at $500k in the future is therefore highly likely.
As the Winklevoss twins state their position, Fidelity Investments, on Aug 27, announced their plans of setting up a Bitcoin-only fund.