Dec 17, 2020 - Economy

Bitcoin prices are far below fair value, Guggenheim CIO says

Data: Yahoo Finance, as of 3:40pm ET Wednesday; Chart: Axios Visuals
Data: Yahoo Finance, as of 3:40pm ET Wednesday; Chart: Axios Visuals

Guggenheim Partners CIO Scott Minerd told Bloomberg on Wednesday that bitcoin's current price is well below fair value and that given its scarcity and the “rampant money printing” by the Fed, the digital token should eventually climb to about $400,000 per coin.

By the numbers: Bitcoin rose above $23,000 overnight bringing its 2020 gain to more than 200%.

  • Last month, Guggenheim filed to reserve the right to invest as much as 10% of its $5.3 billion Macro Opportunities Fund in the Grayscale Bitcoin Trust, which invests solely in the cryptocurrency.

What he's saying: “Our fundamental work shows that bitcoin should be worth about $400,000,” Minerd said. “It’s based on the scarcity and relative valuation such as things like gold as a percentage of GDP. So you know, bitcoin actually has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions.”

  • Similarly, hedge fund manager Paul Tudor Jones said earlier this year he’s been buying bitcoin as a hedge against inflation after years of muted price increases.

Bulls on parade: “We have a new line in the sand and the focus shifts to the next round number of $30,000,” Antoni Trenchev, co-founder and managing partner of Nexo, a crypto lender, told Bloomberg.

  • This “is the start of a new chapter for bitcoin. It’s a narrative the media and retail crowd can properly latch onto because they’ve been noticeably absent from this rally.”

Don't sleep: Market metrics that track inflation have continued to rise in recent weeks. The 5-year breakeven rate was 1.92% Wednesday, its highest closing point since March 2019, Tradeweb data show.

  • The 10-year breakeven rate is 1.94% and at its highest since May 2019.
  • The 30-year breakeven rate is 1.98%.
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