Bitcoin is still Crypto King: Alex Tapscott

By Michael Hainsworth

Bitcoin $100K? Alex Tapscott says his analysis shows that’s the true value of the cryptocurrency as it pushes back towards it’s all-time highs near $64,000. But what’s keeping the crypto king on its throne?

“Given record inflation and more money printing from central banks, Bitcoin is finally starting to detach itself entirely and act as that barbell, that other side of the pendulum, so to speak for other risk assets,” Tapscott tells The Alt Thinking Podcast, adding, “and that's something that I think is really exciting, I think is sort of fulfilling its destiny in that respect.”

The ETF thesis is playing out well. Just one year ago Bitcoin was trading at a third of it’s current valuation ($20,000). Since then, Tesla Motors has jumped onboard the crypto wagon, regulators are more open to ETFs, and even El Salvador now accepts it as legal currency. It’s even being used by firms in the financial services sector as a treasury asset. The Toronto Stock Exchange is home to almost a half-dozen different ETFs, including the carbon-neutral Ninepoint Bitcoin ETF.

That carbon neutrality is critical, Tapscott admits, “Bitcoin mining is definitely energy intensive,” but he believes criticism calling Bitcoin a “polluter” is misguided. He argues, “because of the nature of Bitcoin mining, miners often located near where power is free or nearly free, which is often stranded or underutilized, renewable sources of energy, things like hydroelectric and wind” and cites a Cabridge study that shows almost half of Bitcoin mining is 100% renewable.

But what about the other half? Ninepoint’s Bitcoin ETF is using carbon credits and the work of partner firms to determine exposure and analyse solutions.

Tapscott believes a small amount of Bitcoin in a portfolio not only improves returns, but improves risk-adjusted returns when looking at the stellar past few years for the cryptocurrency. Putting himself in the mind of a retail investor he says, “you would think, wow, that's sort of weird. You know, this is a volatile asset. It goes up, it goes down. How could it be that it reduces risk?”

The answer, Tapscott says, is that Bitcoin is uncorrelated to stocks – and has seen a strong negative correlation to an equities index like the NASDAQ. It’s also thanks in part to COVID-related record inflation and the money printing from the world’s biggest central banks. “Bitcoin is finally starting to detach itself entirely and act as that barbell, that other side of the pendulum, so to speak for other risk assets,” he tells the Alt Thinking Podcast. “And that's something that I think is really exciting, I think is sort of fulfilling its destiny in that respect.”

But how does Bitcoin get to $100K? Tapscott likes to point to the Stock to Flow ratio for guidance. It’s a model that treats the cryptocurrency like a precious metal where the supply is limited and mining it takes time. The similar scarcity to Bitcoin and the amount of digital mining required to mine the 3 million outstanding coins creates a consistently low supply rate. Using this to evaluate the current stock of the cryptocurrency against the flow of new production reveals a high ratio – indicating Bitcoin is increasingly scarce and more valuable as a store of value.

When does Bitcoin hit $100K? The Alt Thinking Podcast couldn’t get THAT prediction out of Tapscott but he advises investors to look to the brightest minds on Wall Street: “Where you see a lot of interest though, is on the buy side. People who know how to make money. So people like George Soros, Steve Cohen, Druckenmiller, George Miller, these are like very successful investors. And they know a trend when they see one. Maybe they spotted gold or maybe they spotted other asset classes in the past, and this is no different. So, you know, follow the money as they say. And if that's the only metric you're using, I think it's going to lead to some pretty positive conclusions about this.