Showdown 2021: Why Bitcoin and gold investors may both be right in the year ahead

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Fred Pye, chief executive of 3iQ , which in April launched a Toronto-listed Bitcoin fund that has grown to roughly $400 million in market capitalization, thinks Bitcoin has an edge because it can more easily be used to conduct transactions.

“Gold’s use case is largely a store of wealth, and then it’s jewelry and possibly gold colouring for windows — there’s not a lot of uses,� Pye said.

He added that supply and demand factors should work in Bitcoin’s favour as well.

As gold prices go up, it becomes economical to mine gold deposits that were previously considered too low-grade to profitably exploit. That means increases in the price of gold should help the supply grow.

Bitcoin soared 220 per cent in 2020 to break the US$23,000 threshold.
Bitcoin soared 220 per cent in 2020 to break the US$23,000 threshold. Photo by Ina Fassbender/AFP via Getty Images files

Meanwhile, Bitcoin’s supply growth rate is algorithmically fixed to drop in half every four years.

Right now, Pye said, the supply of both gold and Bitcoin is growing at about four per cent per year.

While that may persist for gold, new Bitcoin will become much harder to come by when the growth rate drops to two per cent in 2024.

“I think there’s some short-term risks to Bitcoin, but the reality is the long term is so rosy,� he said.
Pye forecast that in 2021 the price of bitcoin would hover between US$20,000 and US$30,000 and that by 2022, it would reach $50,000.

There’s some short-term risks to Bitcoin, but the reality is the long term is so rosy

Fred Pye, chief executive, 3iQ

Grosskopf, meanwhile, said he believes gold has a digital future that will improve its value as a currency as well.

“I’m still a huge believer that the biggest thing that will ever happen to gold is it will go digital,� he said, noting that such a move would allow the metal to be stored in a central location while ownership is being tracked on a blockchain ledger much the way Bitcoin is. “What digital gold will be is one standard, one denomination, stored where it’s quoted to be stored. You never have to move it, but it’s on the blockchain…. The two (Bitcoin and gold) are going to come together.�

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