Bitcoin has had a pretty tremendous year with the price reaching a new all time high of over $60,000 per coin.
It has also had a pretty bad year with the low going a little under $30,000.
Gold has also had an okay year, but nothing compared to Bitcoin. The price of gold has remained relatively stable in the $1700/ounce to $2000/ounce range since the COVID-19 pandemic first broke out.
That might sound like a big swing, but the US has been printing a lot of money in response to the pandemic. Basically, the increase in the value of gold is not really impressive when you consider the price it trades at today is the same price it traded at in 2013.
Bitcoin cost under $100 in 2013, so it should be pretty clear which was the better investment.
Anyway, this article will discuss the chances of 2022 being a good year for both Bitcoin and gold. The benchmark for Bitcoin is $100,000 per coin while gold has a lower benchmark at $10,000 per ounce.
Gold Won’t Hit $10,000 in 2022
The chances of gold reaching $10,000 in 2022 are extremely slim if you look at the historic trends for the price of the commodity. As we mentioned earlier, the price of gold today is the same as it was in 2013.
You might think that means gold is a good store of value, but it’s not.
Remember, the US Dollar is an inflationary currency. And the US Federal Reserve printed an unprecedented amount of money in 2020 in response to the COVID-19.
A little over 20% of the total US money supply was printed in 2020.
Yes, that means 20% of the entire money supply from 1970-2019 was printed in a single year.
The obvious conclusion from that is inflation will hit hard.
For those that do not know, you generally want to hold assets like real estate, gold, bitcoin, and businesses in times of inflation.
As an aside, inflation always occurs, so you should keep your money in assets if possible.
Anyway, the reasoning behind this is that asset prices rise with inflation. Real estate and Bitcoin have certainly gone up in price over the years due to inflation and very low interest rates.
Due to this, one could make an argument that gold could go on a huge runup due to inflation.
The only problem with this idea?
The price of gold has been decreasing in 2021. It has actually been stagnant for the past 8 years. The pandemic had people nervous about a complete economic collapse, so gold became popular again. But before that, no one wanted gold.
Unfortunately for gold, it cannot really hold onto the price momentum from the pandemic and it has lost quite a bit of value.
To summarize, gold is an asset. Assets generally rise in price during times of heavy inflation.
Gold has not really risen in price – it’s actually dropped a little bit.
If that pattern continues, then gold will not hit $10,000 in 2022. That would be a 6x increase in the price, which is borderline impossible for something as stable as gold.
Could the price of gold increase a little bit?
Sure, but $10,000 gold in 2022 is basically out of the picture.
The Argument for $100,000 Bitcoin in 2022
Bitcoin, like gold, is considered an asset. In fact, the current bull run has seen the proliferation of many people discussing the idea of Bitcoin as “digital gold.”
The idea behind this is that bitcoin does everything gold does, but better.
It has more price appreciation than gold, it’s easier to spend than gold, and you can actually own it pretty easily if you have access to a computer.
The only real difference is that you cannot touch bitcoin nor does bitcoin have any industrial uses. Though, to be fair, under 10% of gold is used for any industrial purposes. Gold is mostly used as an investment.
We already covered the inflationary monetary policy of the Federal Reserve and the effect that inflation has on the value of assets.
Yes, bitcoin is an asset.
Moving on, Bitcoin has a lot of historic precedent for a massive price increase. The project was launched in 2009 and the value of bitcoin was practically $0.00 for a few years.
It is the best performing asset in the world over the past decade and nothing else even comes to close it.
We will put it this way. The price of bitcoin has risen from 0 to 60,000 (6,000,000% increase), which is basically an infinite increase because it started at 0.
To reach $100,000 by the end of 2022, bitcoin will have to rise in the price by a little under 50% in a little over a year.
It is certainly doable for the cryptocurrency from a pure numbers perspective. It’s basically a guarantee at this point.
Fortunately, we do not have to rely on “the price of Bitcoin will be $100,000 because the price of Bitcoin always increases” type logic for this. There is actually a lot of good news in the pipeline with bitcoin.
Here are some of the current developments related to Bitcoin.
El Salvador Made Bitcoin Legal Tender
The biggest Bitcoin news is that El Salvador has made the cryptocurrency legal tender.
You read that right, Bitcoin is legal tender in a country.
This means businesses must accept the cryptocurrency as payment. Perhaps most importantly for the cryptocurrency, you can pay your taxes in bitcoin.
Now, Bitcoin is not really all that popular in El Salvador at the moment. A lot of the country does not have access to the internet or a smartphone, which makes transacting in Bitcoin pretty difficult.
It also became legal tender less than a month ago.
Bitcoin becoming legal tender is obviously huge news, but the most major part is that a few billion dollars worth of El Salvador’s GDP is remittances from the US. It’s basically migrant workers sending money back home using Western Union or other money transfer services.
Those services charge massive fees.
Bitcoin transactions, especially those done on the Lightning Network, are much cheaper to practically free (Lightning Network).
This is a huge use case for Bitcoin. People will actually use the cryptocurrency for transacting value without having to pay a wire transfer service an exorbitant fee.
You can expect the price of the cryptocurrency to rise with this news.
Lightning Network Adding More Nodes
Lightning Network is a layer 2 solution for bitcoin that allows rapid transactions at a very low fee (a few satoshis).
The Lightning Network has not really been all that popular, outside of hardcore Bitcoin circles, since it launched in 2018.
That changed in 2020 when a large number of nodes were added due to the launch of Strike.
This changed even further when El Salvador made Bitcoin legal tender in September 2021. At the moment, the Lightning Network has ~16,000 nodes compared to ~7,600 nodes at the same time last year.
The number of nodes is important because that indicates the amount of people using the protocol.
This is important for two reasons:
- That is more bitcoin locked in the Lightning Network, which means it can’t be sold on the market.
- Most Bitcoin transactions the general public does will be done on Lightning Network rather than the main blockchain.
Brazil Considers Making Bitcoin Legal Tender
We covered how El Salvador made Bitcoin legal tender.
That got the attention of a few countries that are not nearly as wealthy as China or the United States.
Ukraine and Brazil have both expressed some interest in making Bitcoin legal tender. A bill was introduced to the Brazilian congress that would make Bitcoin legal tender.
Brazil is a huge country with an equally huge population of over 200 million.
Bitcoin becoming legal tender in Brazil would send the price of the cryptocurrency on a rocketship to the moon. The price would almost certainly increase by over 100% within a year of the country making it legal tender.
Again, this is only a bill that has been introduced to their congress. But if it passes, then the price of Bitcoin will basically be unstoppable.
DeFi and NFTs are Finally Here
Our final point is not even related to Bitcoin, at least not directly.
Decentralized finance and non-fungible tokens have finally reached a place where people can actually use it.
Sure, the gas fees are a little high, but that will change at the end of 2021 or the beginning of 2022.
Basically, the popularity of DeFi and NFTs on Ethereum will cause the price of Ether to increase. The price of the two are generally positively correlated, so this will have a huge impact on the price of Bitcoin.
It actually might lead to a little pullback in the price because more people will actually be able to use Ethereum due to the lower gas fees.
That said, a rising cryptocurrency tide raises all cryptocurrency projects.
You can expect the price of Bitcoin to track upwards with Ether once Ethereum 2.0 is released.
DeFi and NFTs are simply a piece of the picture that will lead to the price increase.
Hold Your Bitcoin
We are obviously very bullish on $100,000 Bitcoin in 2022.
Nothing is for certain, but the odds are very good of it happening in 2022. If it does not happen in 2022 for some reason, then it will almost certainly happen within the next few years.
There is simply too much good stuff in the Bitcoin pipeline with Ukraine and Brazil both discussing making it legal tender. El Salvador already has it as legal tender, but a fairly small percentage of the population use it.
Our point is that El Salvador has not really come online with Bitcoin and the price is already at nearly $60,000. Just wait for the country to come online with Bitcoin.
Things will get really crazy if/when Brazil makes Bitcoin legal tender. The population of Brazil is over 200 million.
That is a lot of people using Bitcoin.
Another reason to hold your Bitcoin is that the last place you want your money is sitting in a bank account earning 0.1% interest and losing 10% of its value every year because of inflation.
That about sums it up for the chances of gold hitting $10,000 in 2022 and Bitcoin hitting $100,000 in 2022.
Bitcoin has a far better chance of achieving its goal than gold.
In fact, gold has become a sort of legacy investment mostly aimed at people not as familiar with technology.
This is sort of evident by the price remaining stable since 2013, which is the same year that Bitcoin first started getting mainstream attention.
At this point, most people under 30 are far more likely to own some bitcoin than own any gold. And that is likely responsible for a lot of the liquidity leaving the retail gold market.
To summarize, Bitcoin is better than gold. You can own some gold if you want, but it’s as close to a guarantee without being a guarantee that bitcoin will beat gold in the next 10 years.