Bitcoin price could reach $55 000 in five years, Wall Street strategist says

Fundstrat's Tom Lee believes that the cryptocurrency could become a substitute for gold

Bitcoin price could reach $55 000 in five years, Wall Street strategist says

The bitcoin price could reach as high as $55 000 by 2022, CNBC reported last week, citing one widely followed Wall Street strategist.

On Friday Tom Lee, managing partner and head of research at Fundstrat Global Advisors, proposed a model for establishing valuation framework for bitcoin, based on the premise that the cryptocurrency could become a substitute for gold.

“We believe one of the drivers [of bitcoin] is crypto-currencies are cannibalising demand for gold,” Lee said in a report, as quoted by CNBC. “Based on our model, we estimate that bitcoin's value per unit could be $20,000 to $55,000 by 2022," he added.

The inherent limit on bitcoin supply and the potential worth of the cryptocurrency will likely create high demand for a limited product, driving up the price. Lee also expects that central banks will consider buying digital currencies if the total market capitalisation tops $500 billion. Currently the value of all cryptocurrencies hovers around $78 billion, according to data from CoinMarketCap.

According to Lee, central banks showing interest in digital currencies will be “a game changer, enhancing the legitimacy of the currency and likely accelerating the substitution for gold (by investors)". The strategist noted a Bloomberg news report that central banks have looked into the possibility of owning digital currencies.

The bitcoin price hit $3,000 this year, surging from below $1,000 at the end of 2016. The digital currency has lost some ground since peaking in June and is currently trading at around $2300. The high level of volatility is often cited by sceptics as one of the biggest risks associated with cryptocurrencies. Lee acknowledges that the annualised bitcoin volatility of 75 percent is “substantially higher than gold's 10%”. But in his report he also notes that “gold's volatility approached 90% from 1971 to 1980 as the U.S. abandoned the gold standard — hence, we expect this to improve over time”.

Lee’s report on bitcoin is the latest in a series of recent analyst comments, painting a bullish outlook for the cryptocurrency. Last week Goldman Sachs’ Sheba Jafari said that the digital currency could soar to as high as $3,915, while according to Standpoint Research’s Ronnie Moas the price is set to double next year.

According to Google Finance data, as of 12:15 BST today, the bitcoin price stood at $2,368.68, up 1.11%.

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