The firm says sanctions on Russia could see central banks look to ‘change their reserve mix.”
Bitcoin’s value could rise to at least $1.3 million in the event the cryptocurrency ended up as de facto global reserve asset, experts at US investment firm VanEck have said.
VanEck’s Eric Fine (Head of Active EM Debt) and Natalia Gurushina (Chief Economist, Emerging Markets Fixed Income Strategy,), said the prediction is pegged on an attempt at quantifying what would happen if there emerged “new gold or Bitcoin-backed currency regimes.”
Sanctions on Russia mean central banks will act
In a report published on 30 March, the VanEck executives postulate that the global reserve system may have changed dramatically due to the sanctions imposed on Russia following its invasion of Ukraine.
Russia said last week that it would accept Bitcoin for its oil and gas.
“Central banks are likely to change their reserve mix to the detriment of dollars (and euros and yen) and the enhancement of something else, to one extent or another. US, Eurozone, and Japanese sanctions on the Central Bank of Russia essentially “disappeared” Russia’s dollar, euro, and yen reserves. As a result, some central banks—and private actors—will be diversifying their reserves.”
Bitcoin as a global reserve asset could reach $4.8 million
Using calculations based on the “global” price for Bitcoin and divided by the total BTC supply, the team was able to theorize where its value could be if it were a global reserve.
The VanEck executives say they applied the same concept to gold- which has a common denominator as Bitcoin in having finite supply- to arrive at potential prices per ounce, the experts noted.
“The bottom-line is that the upside for gold and Bitcoin is potentially dramatic. Specifically, the framework estimates gold prices of around $31,000 per ounce and potential Bitcoin prices of around $1,300,000 per coin.”
According to the insights report, making adjustments to the calculations from the base M0 to the broader and more common M2, with “greater strains on financial and monetary systems generate even higher prices,” they explained.
VanEck says Bitcoin’s implied price based on the global M2 assessment suggests a value of $4.8 million per coin. For gold, that jumps to around $105k per ounce.
While the firm gives these predictions a big “IF”, it says the more likely scenario is around the Chinese Yuan becoming the new contender for a reserve currency.
Bitcoin was trading at around $45,000 with its value 4.8% down in the past 24 hours, according to tp data on CoinGecko. Gold, on the other hand, was 1% down at $1,934 per ounce on 1 April (8:40 am ET).
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