KEY POINTS
- US Global Investor CEO Frank Holmes says that halving Bitcoin in May contributed to BTC’s supply shock
- Big organizations are buying all the new Bitcoin supply
- Devolved Finance is a key driver for Ethereum
Frank Holmes, chief executive and chief investment officer at US Global Investors, predicted a rise in the prices of Bitcoin and Ethereum – the first and second largest cryptocurrencies – by 2021.
In an interview with Kitco, a gold-centric outlet, Holmes said both cryptocurrencies will play well next year due to higher adoption. The key value drivers are different from the two, he said.
The value of Bitcoin is increasing due to the number of people adopting it, as evidenced by the growing number of active BTC addresses.
“The number of wallets, people embracing Bitcoin, has been growing for the last three years. Nice steady growth, ”he told Kitco.
However, Holmes does not believe Bitcoin is rising because it is a digital version of gold. He said he believes it is only because the Bitcoin halved back in May that acts as another key driver for its price. He argued that if that kind of supply shock happened to gold, the price would also increase significantly.
“If tomorrow, if all the gold mines in the world said we were going to cut supply by 50%, I can assure you that gold will be $ 10,000,” he added.
After halving Bitcoin in May, the number of new Bitcoins issued daily was cut to just 900 BTC. The drop in supply along with major organizations PayPal and Square were buying these 900 BTC daily.
Basic economic principles have revealed that the only way to supply scarce and increasing demand to balance is at a higher price. Since Bitcoin’s halving, the cryptocurrency’s price jumped from $ 9,000 to nearly $ 19,000 in just six months.
As for Ethereum, Holmes said the latest developments in decentralized finance are a key driver for the second-largest cryptocurrency. Total locked-in value in decentralized finance (DeFi) is now worth $ 14.6 billion, Cointelegraph reported.
Finally, Holmes said that for Ethereum’s supply side, the switch to Ethereum 2.0 is the key driver. In Ethereum 2.0, verifiers will “participate” their ETH to confirm transactions instead of miners doing so in Ethereum 1.0.
“So what’s happening here is that supply is shrinking, demand is growing, and DeFi is continuing to grow, so I think Ethereum is actually going to trade much higher,” he said.
