New York –John Pfeffer, a partner at Pfeffer Capital, is not only waging on Bitcoin, but he is also giving it a bold price target of $700,000—at least 75 times its current price of $9,100!
Although Pfeffer did not provide a specific time frame for his prediction, his target surpasses even the most optimistic forecasts from other powerful investors such as Tim Draper, a venture capitalist, who predicted Bitcoin’s price would reach $250,000 by 2022.
According to Pfeffer, “Bitcoin is the first viable candidate to replace gold the world has ever seen”. The former partner at private equity firm KKR added, “So if Bitcoin becomes the dominant non-sovereign store of value, it could be the new gold, or new reserve currency.”
How did Pfeffer end up with his $700,000 prediction? Here’s how his calculations work: First, he assumes bitcoin may possibly replace all the gold bullion currently owned by private investors. As per Pfeffer, “Bitcoin is vastly easy to store and secure”.
All privately held gold bullions currently have a total value of $1.6 trillion. Now let’s assume there will be 18 million bitcoins distributed by the time the coins completely replace gold bullion (so far there are 17 million bitcoins produced out of the 21 million max cap that exists), the suggested value of a bitcoin would be $90,000. This is, for Pfeffer, the most conservative possible scenario, which gives at least an 8% chance of becoming reality.
But Pfeffer still has even bigger hopes for Bitcoin—that it would eventually be on the same level as traditional foreign reserve currencies are. “Its imaginable that Bitcoin displaces some form of reserves over time,” Pfeffer said.
Total foreign reserves are worth $12.7 trillion as of today. Although it’s not possible for bitcoin to completely replace all foreign reserve currencies, Pfeffer also demonstrated situations where Bitcoin would eventually account for a quarter of foreign reserves, implying a 20x return from current prices. And, if bitcoin’s total value does rise to the equivalent of all foreign reserves, it would lead to a bitcoin price of $700,000.
“As an investor, what interests us most at this point is that Bitcoin might become the dominant non-sovereign currency,” said Pfeffer. While he puts only a 1% chance on Bitcoin actually hitting $700,000, that one chance alone is enough for him “to make a small, venture capital-style, buy-and-hold longterm bet on,” he added.
Pfeffer’s strategy is simply “Buy the ticket, take the ride”.
Besides bitcoin Pfeffer also experimented with investing in other types of cryptocurrencies in the last two years. However, he has since trimmed his crypto collection to just Bitcoin again. Pfeffer realized how many other cryptocurrencies aside from bitcoin are not only used simply as “money” but as utility tokens. This means these coins are used for performing specific functions and serve other purposes aside from being just pure currency.
Pfeffer believes utility tokens will just turn out to be “value traps” since they get exchanged frequently and their value will always be put under pressure.
Meanhile, Bitcoin offers the opposite. There is one way out of this value trap, which is if people wanted to store their wealth in a crypto asset,” Pfeffer said. This is where Bitcoin comes in—backing his original theory that Bitcoin will replace gold.