Cryptocurrencies could stay a feature of global markets as something akin to “digital gold,” even if their importance in economies remains limited, former US secretary of the treasury Lawrence Summers said.
Speaking at the end of a week in which bitcoin whipsawed, Summers told Bloomberg Television’s Wall Street Week that cryptocurrencies offered an alternative to gold for those seeking an asset “separate and apart from the day-to-day workings of governments.”
“Gold has been a primary asset of that kind for a long time,” said Summers, a paid contributor to Bloomberg. “Crypto has a chance of becoming an agreed form that people who are looking for safety hold wealth in. My guess is that crypto is here to stay, and probably here to stay as a kind of digital gold.”
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If cryptocurrencies became even a third of the total value of gold, Summers said that would be a “substantial appreciation from current levels” and that means there’s a “good prospect that crypto will be part of the system for quite a while to come.”
Comparing bitcoin to the yellow metal is common in the crypto community, with various estimates as to whether and how quickly their total market values might equalize.
Yassine Elmandjra, a crypto analyst at Cathie Wood’s Ark Investment Management LLC, said earlier this month that if gold is assumed to have a market cap of about US$10 trillion, “it’s not out of the question that bitcoin will reach gold parity in the next five years.”
With bitcoin’s market cap about US$700 billion, that could mean price appreciation of around 14-fold or more.
However, cryptocurrencies do not matter to the overall economy and were unlikely to ever serve as a majority of payments, Summers said.
Summers is on the board of directors of Square Inc, which this month said that sales in the first quarter more than tripled, driven by skyrocketing bitcoin purchases through the company’s Cash App.
Summers’ comments were echoed by Nobel laureate Paul Krugman, who doubted crypto’s value as a medium of exchange or stable purchasing power, but said that some forms of it might continue to exist as an alternative to gold.
“Are cryptocurrencies headed for a crash sometime soon? Not necessarily,” Krugman wrote in the New York Times. “One fact that gives even crypto skeptics like me pause is the durability of gold as a highly valued asset.”
Separately, Tesla Inc CEO Elon Musk is again writing on Twitter about technology and cryptocurrencies, and this time he is clear on where his support is at.
In a thread started by Musk comparing magic to technology where someone asked what he thought about people “who are angry at you because of crypto,” Musk wrote that the “true battle is between fiat & crypto. On balance, I support the latter.”
Bitcoin rose after Musk’s post, and was trading at about US$38,700 as of 9:32am New York time on Saturday.
Musk has made similar comments before, including in December last year when he tweeted that “bitcoin is almost as bs as fiat money.”
In February, he said that “when fiat currency has negative real interest, only a fool wouldn’t look elsewhere.”
Earlier last week, Musk wrote on Twitter that he would not be selling any dogecoin, and he also posted a cryptic image of a dollar bill with a shiba inu replacing the face of a former US president.
Bitcoin ended the week in the volatile territory after a new warning from Chinese officials over cracking down on cryptocurrencies. The earlier sell-off on Friday hit bitcoin believers still fuming after Musk did an about-face and criticized the token for its energy usage.
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