He believes that the growing adoption will push Bitcoin higher next year, and that DeFi will have a similar effect on Ethereum.
2021 is shaping up to be a tremendous year not only for gold but also for crypto currencies, according to Frank Holmes, CEO of U.S. Global Advisors.
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In an interview Monday with Kitco News, Holmes said he expects digital assets such as Bitcoin (BTC) and Ethereum (ETH) to perform exceptionally well along with gold. He believes these digital assets are enjoying increased adoption because of their underlying value momentum.
Regarding Bitcoin, Holmes felt that more people are adopting the digital asset in a continuation of a multi-year trend:
“The number of wallets, people who are adopting Financial Peak has been growing over the last three years. Good steady growth.
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Although many in the crypto industry compare Bitcoin to gold, Holmes said that BTC is not being driven by the same macro drivers as bullion. Rather, Bitcoin’s rocket fuel comes from the deflationary event of the halving last May.
“If tomorrow, if all the gold mines in the world say that we are going to cut the supply by 50%, I can assure you that the gold will be at USD 10,000.
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“It’s a supply-demand function,” Holmes concluded. After May’s halving, the amount of newly mined BTCs entering the market was reduced to about 900 per day, and this supply has been rapidly absorbed by institutions and mega-corporations.
Ethereum, meanwhile, continues to benefit from the latest developments in decentralized finance, or DeFi. In terms of total blocked value, the DeFi ecosystem is worth more than USD 14.6 billion. Ethereum is the building block of much of that activity. The market capitalization of DeFi currencies is currently $18.2 billion, according to CoinMarketCap.
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In terms of gold, Holmes expects a “two standard deviations” move for precious commodities, a move that could push prices up between $400 and $800 in the next 12 months.
“That would take us from $2,200 to $2,600,” he said.
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Gold futures exploded on Monday, rising $26.40 to $1,866.40 a troy ounce on the New York Mercantile Exchange’s Comex division.