Billionaire Investor Says ‘Bitcoin Has Effectively Replaced Gold’

October 02, 2021, 9:30 AM AEST - 7 months ago

In an interview with CNBC during its Delivering Alpha conference, outspoken billionaire investor Chamath Palihapitiya suggested he could “pretty confidently say that bitcoin has effectively replaced gold and it would continue to do so … and so that market cap is just going to grow”.

Chamath Palihapitiya. Source: Fortune magazine

Long History of Bitcoin

Palihapitiya, a well-known early investor in Bitcoin, has previously advocated to have at least 1 percent of your assets in something that is totally uncorrelated (ie, Bitcoin) to the current financial system.

Whether you support the fiscal and monetary policy or not, it doesn’t matter. This [bitcoin] is the schmuck insurance you have under your mattress.

Chamath Palihapitiya

In the interview, he suggested that Bitcoin is the most “profound iteration of the internet we’ve seen” and when asked about the risk of government shutting it down, he responded that it would be “very hard to kill”.

Despite standing out from this Silicon Valley peers in his endorsement of Bitcoin, Palihapitiya is in good company with other billionaires across the globe who have also entered the fray.

Dabbling Outside in Broader Crypto Ecosystem

Despite the bulk of his crypto investments being in Bitcoin, Palihapitiya indicated that he had put a small amount of capital into other projects that one day could be worth “tens of millions, hundreds of millions … “. Presumably his version of a “small amount of capital” is somewhat different to that of an ordinary investor.

Overall, he saw the impact of the sector as being enormous:

For the first time, I think we’re seeing the initial versions of the solution that we thought Bitcoin was supposed to be. Smart contracts, better savings accounts, better insurance, better credit scoring.

Chamath Palihapitiya

Looking at the bigger macroeconomic context, he mentioned he was very concerned about inflation and found crypto particularly attractive as a non-correlated asset:

Bitcoin, Solana, DeSo, a lot of the DeFi protocols because it’s a great counterintuitive hedge against all of this stuff.

Chamath Palihapitiya

Tracking Gold

How has Bitcoin performed relative to gold? Across almost all timescales, as at October 1, it’s not even close:

BTC v other assets. Source: Casebitcoin

Michael Saylor is perhaps less diplomatic about gold’s weak performance:

Notwithstanding the advantages of “digital gold”, some have however argued in favour of a small physical gold position to guard against black swan, apocalyptic events. Perhaps, then, it makes plenty sense to have a form of hard money with a 5,000-year track record.

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