Bitcoin miners might be busy selling more bitcoin than they are creating post halving but Adam Back, the chief executive officer of Blockstream Corp., is not.
“I don’t sell (Bitcoin),” he told Bloomberg in a recent interview.
Blockstream is a company that sells equipment to support bitcoin-related operations and help the likes of Fidelity Investments and investor Reid Hoffman mine bitcoin. It has garnered $90 million to date from investors and may look to raise more funds to expand its mining capacity.
One reason for not selling bitcoin right now is that he believes the world’s leading digital asset will rise to $300,000 within five years (earlier this year he said $100,000 doesn’t seem far fetched). This price target means a surge of more than 3,000% from Bitcoin’s current level of $9,600.
The cryptocurrency recently went though its third price halving and historically, these events have led the price rallies. This halving cut down the bitcoin supply from 1800 BTC per day before halving into half to 900 BTC per day.
Since the halving last month, Grayscale Investments consumed 53% more Bitcoin than it was created. This is one reassuring sign of demand, said Back.
According to Back, this uptrend would be achieved without any additional adoption by institutional investors. While institutions remain cautious, retail investors will continue to show their support just as they have been doing for over a decade.
“It might not require additional institutional adoption because the current environment is causing more individuals to think about hedging,” Back said. “And retaining value when there’s a lot of money printing in the world.”
Still a lot of headroom for price appreciation
In the macro backdrop of COVID-19 pandemic, people are working from home and as such real-estate investments are riskier, he said. Moreover, with bonds overvalued, investors may turn to bitcoin, he added.
“It is causing people to think about the value of money and looking for ways to preserve money,” Back said. “It’s a difficult environment to get any yield.”
Institutional investors meanwhile still largely misunderstand bitcoin, as we saw last month with Goldman Sachs Group’s take on Bitcoin which said it is not an asset class and also “not a suitable investment for our clients.”
According to Back, the report by Goldman was “interesting” but showed “misunderstandings about digital scarcity and what’s useful about Bitcoin.”
This report only indicated that bitcoin is still early in its adoption curve which means, “there’s still a lot of headroom for price appreciation and adoption in the market.”
Back is a British cryptographer with a Ph.D. in computer science who invented Hashcash back in the 1990s. He is also the first person Bitcoin’s pseudonymous creator Satoshi Nakamoto contacted online in 2008, asking about Hashcash. Some say he is Satoshi but Back says, “No, I am not.”