Despite its surge in 2020, Bitcoin is still the most undervalued cryptocurrency asset at the start of 2021, according to analysis from one asset manager.
Anatoly Crachilov, founding partner and chief executive of Nickel Digital Asset Management, as investment firm specialising in linking traditional finance to the crypto sector, told Proactive that Bitcoin’s increasing acceptance by the investment community will “propel a natural widespread demand for the asset” and that the finite and “inelastic nature” of the Bitcoin supply (only 21mln will ever exist) means demand will outstrip supply and subject the price to “upward pressure”.
Crachilov continued, saying that Bitcoin’s first mover advantage as the first notable cryptocurrency has developed a “powerful network effect, which is difficult to match by other crypto assets, and will further drive the adoption”. The CEO added that Bitcoin’s “technical advantage” over real-world assets such as gold will also “create efficient competition for the store of value function, eating into gold’s market share”.
“Other crypto assets, such as Ethereum and [decentralised finance] enabling coins will also experience growth alongside bitcoin (and may outperform in the short term), but their value propositions remain very different to bitcoin and have a greater reliance on untested technology solutions. These coins will attract only a fraction of the institutional capital coming into the space”, Crachilov said.
The CEO added that while he also expected “active regulatory adoption of stablecoin and a shift towards fully-backed, fully regulated coins which can be used as a means of everyday payment”, this would not undermine the investment thesis for Bitcoin as a “non-discretionary asset with immutable supply, offering inflation and currency debasement protection”.
“The digital form of fiat [currency], while dramatically improving asset transfer efficiency, is unable to provide protection against supply increasing at the whim of controlling authority, hence cannot compete efficiently for the long term store-of-value function”, Crachilov said.
Crypto will hit the mainstream this year
Meanwhile, Bradley Duke, chief executive of ETC Group, which in June last year launched the world’s first centrally cleared Bitcoin exchange traded crypto (ETC), said the digital currency and other cryptos will become “much more mainstream” in 2021.
The CEO highlighted “more corporates using cryptocurrencies for their treasury/reserves needs” as well as more institutional investors gaining exposure to the asset class.
Duke also said that the coronavirus (COVID-19) pandemic has caused a “perfect storm” for crypto assets.
“The stimulus packages rolled out have led to growing concerns about inflation, currency depreciation etc and the need for more diversified portfolios – all of this plays well for crypto assets”, the CEO said, adding that better infrastructure will mean there will also be improvements around regulation of the sector and custodial services for the assets.
Bitcoin’s value was up 9.1% at US$34,259 in mid-afternoon trading in London on Wednesday.