Chamat Palihapitiya sees Bitcoin as a defense against Economic uncertainty
10.01.2021

Chamat Palihapitiya sees Bitcoin as a defense against Economic uncertainty

By bit.team

The price of Bitcoin has risen significantly over the past few days, recently surpassing $ 40,000. Chamat Palihapitiya, a well-known billionaire, venture capitalist, founder and CEO of the venture capital company Social Capital, described Bitcoin as a mean of protection against global uncertainty.

Bitcoin has the qualities of a secure asset

In an interview with CNBC, Palihapitiya cited a possible time horizon of five or ten years before Bitcoin is likely to reach $ 200,000 in value. He explained that this is partly due to a lack of trust in governments. Palihapitiya said:

“The reason is that every time you see all this happening, it just reminds you that wow, our leaders are not as reliable and trustworthy as they used to be. So just in case, we really need some, you know, insurance that we can keep on hand, giving us access to an uncorrelated hedge.”

Governments around the world have taken various measures to address the economic impact of the COVID-19 pandemic. For example, in the United States, orders for stimulus packages and economic assistance are printed en masse, which causes the de facto depreciation of the world currency – the US dollar.

Compared to the dollar, Bitcoin has excellent fundamentals that are not affected by the economic and health situation caused by the coronavirus. Since the leading cryptocurrency has no borders and is managed by people, it allows holders to independently control their funds-without the need for centralized management. Many market bulls have also touted it as a hedge against inflation.

Last October, Fidelity Digital Assets, an investment firm, published a report showing the lack of correlation between the price of Bitcoin and other major financial assets, such as stocks and gold.

Palihapitiya mentioned: “Bitcoin will eventually move on to something much more important, but at the moment you’re just getting all this data to back it up.”

The investor went on to say: “The structure of society is worn out, and until we figure out how to improve it, it’s time to just have a little insurance. It’s just unbelievable.”

Bitcoin serves as a protection against uncertainty

Usually, uncertainties are situations where it is impossible to calculate the odds. Unconditional uncertainty, such as rising inflation, can be insured with Bitcoin. The leading cryptocurrency has qualities that make it an ideal safe haven asset.

First, it has a high degree of availability, which allows anyone to send and receive funds without permission. On the other hand, fiat currencies are subject to a high degree of uncertainty because they rely on third-party custodians to verify their transactions.

Second, the fixed supply limit of 21 million coins minimizes the uncertainty affecting all fiat currencies that depend on the monetary policy of central banks.

By exercising the right to print unlimited amounts of money, governments are providing ostensible economic relief, risking devaluing fiat, thereby increasing currency instability.