CoinGate CEO: Bitcoin will surpass the six-digit figure: When and why?
One of the most famous Lithuanian magazines for men, A-Zet, recently asked me some questions about what’s going on with cryptocurrency markets these days.
For those who don’t know, my name is Dmitrijus Borisenka, one of the three founders of CoinGate, a CEO and an enthusiastic entrepreneur with more than ten years of experience in building businesses.
I became curious about cryptocurrencies way back in 2012, and my curiosity quickly led me to become an early evangelist and investor in blockchain technology. Just two years later, in 2014, my closest friends and I successfully started a crypto payment processing business, a brand of which is now known worldwide.
As mentioned, I was contacted by A-Zet journalist Ovidijus Jurevičius with an offer to talk about this unusual crypto industry, its future and the Bitcoin itself. I, of course, agreed.
- What were the reasons for Bitcoin and other cryptocurrencies to skyrocket during this seemingly tricky period for the economy? Could it be related to money printing?
Unprecedented COVID-19 times asked for drastic decisions from the world’s governments. In 2020 alone, The United States Federal Reserve (The Fed) printed as much as 22% of all U.S. dollars currently circulating globally. But what rounds up to $ 9 trillion for stimulating the affected economy has raised the country’s debt-to-GDP ratio by 137%.
The U.S. is not alone in this as other central banks also print money — the European Union, Japan, Hong Kong. Meanwhile, skeptics of such decisions are shaking heads and ringing alarm bells over rising currency inflation and yet another economic bubble.
Since money keeps losing value every year, it is also not unprofitable to hold it idle. As a result, various funds, companies and family businesses are looking to put their money not only in traditional investment sources such as stocks, gold, bonds or BPFs but also in riskier alternatives that could potentially bring more significant returns.
As the vast majority of positions in the stock market have now reached full price peaks (e.g. Tesla and FAANG stocks, indices of precious metals), a large portion of the capital started to move to exciting but still little-known cryptocurrencies of Bitcoin and Ethereum.
- What are the cryptocurrency forecasts for 2021? Will more people be investing in cryptocurrencies?
Twelve years ago (on January 3, 2009), the Bitcoin network gave birth to its first block, otherwise known as the “genesis” block. That is when its mysterious creator Satoshi fulfilled his extraordinary vision and realized it in a very narrow circle of like-minded cryptographers.
Even though Bitcoin took a while to gain momentum and recognition it has now, it was already called digital gold at the time. This mentality formed due to an emission mechanism programmed in the protocol: there can be only 21 million bitcoins in existence, and the supply of new ones halves every four years.
With 18.6 million Bitcoin already mined, now we have a very limited and steadily declining supply in times of growing interest. And yet, with today’s bitcoin price sitting at around € 40,000, its total capitalization is just € 730 billion. For comparison, the gold market cap is valued at € 8 trillion. Still a long way to full-fledged recognition.
Everyone in our market is trying to be a prophet. Still, first I want to leave the reader with this number: according to 2020 statistics, as many as 100 million people worldwide have used cryptocurrencies, or just under a third of Americans, and more and more people are perceiving and presenting Bitcoin as the 21st-century gold because it mimics gold properties so well. With that in mind, I believe the value of one bitcoin will surpass a six-digit number in less than three years.
- Can we assume that a new generation of entrepreneurs (younger audience) is driving investments in cryptocurrency?
Many of the younger generations of entrepreneurs got acquainted with cryptocurrencies and started investing during the 2017–2018 crypto bubble. At the time, there was a great deal of interest in the industry from private individuals. However, the price jump in 2020 was mostly influenced by large companies, corporations and investment funds.
Grayscale Investment Fund, which manages a € 25 billion crypto fund, said that pension funds have started diversifying part of their assets by investing in cryptocurrencies. The Pantera Capital Fund also announced that they received a record amount of inquiries from institutional investors.
Besides, numerous other companies (Guggenheim Partners, MicroStrategy, Massmutual) are putting hundreds of millions of dollars in Bitcoin to protect their fortune from fiat inflation, whilst the payment giant Paypal is buying up all the freshly mined Bitcoins that it can get.
Of course, businesses like Robinhood, Revolut, various CFD products, which allow investing in cryptocurrencies quickly and easily, also contribute a lot. And yet, it’s just a drop in the ocean compared to the influx and influence of institutional investors.
- As with any investment, there are particular risks. What risks could you single out?
Bitcoin, altcoins and the entire decentralized economy (DeFi) require some technical preparation to learn how to manage and secure funds on your own. Unfortunately, it can become both a blessing and a curse.
Admittedly, there are many scammers in this industry, so people should be especially vigilant about who they are sending your money to. Over the past six years, we’ve heard hundreds of different stories about how people have been lured out of their crypto, so before you start investing in cryptocurrencies, first you should be adequately familiar with how they work and how to store them.
Another essential aspect that can imply risks is price fluctuations. In this market, nervous day-traders can find it particularly difficult to stay calm and methodical. So I believe that the ideal time to invest in cryptocurrency is at least for a four-year term.
This number is not entirely out of the blue as it coincides with another innovation of the Bitcoin protocol — the so-called halving, which reduces the issuing rate of new bitcoins on the network by half every four years.
Just a year ago prior to the 3rd halving, 12.5 bitcoins were mined every 10 minutes. Today, this number is already 6.25 bitcoins per block, but in 2024 after the 4th halving, this number will be just 3,125. This sequence will last until about the year 2140 when the very last fraction of bitcoin will be mined.
So in the long term, increasing demand and a reducing supply of such a scarce asset should result in its rise in value, just as it did after previous halvings.
- Do you think businesses should adapt to cryptocurrencies as they are becoming embedded in our daily lives? E.g., accept payments, etc.
Today I can safely say that some businesses no longer see Bitcoin payments as an innovation, but more as a necessity. We mainly talk about services like web hosting, VPN, server rental, various e-commerce stores and a tourism sector (airline tickets, hotels). Since Bitcoin is pseudonymous, it is also successfully used as a payment method on adult websites.
- How do you think Bitcoin and other cryptocurrencies will look like in five years?
Consensus opinion right now is that Bitcoin has a bright future, and rightfully so. It is currently the only open-source technology of this scale that can replace and even surpass gold with its unique properties, a precious metal that humanity has used for thousands of years to measure and preserve value.
It is precisely how big investors use Bitcoin right now, while some countries are openly considering accumulating Bitcoin reserves and perhaps even mine it. As such, some believe that bitcoin can become a global reserve currency in the long run. Still, it is unlikely to happen in the next five years.
We have lots of Bitcoin maximalists in our company, but I also should mention the importance of Ethereum protocol. During 2020, the decentralized economy (DeFi) grew from $ 1 billion market capitalization up to $ 16 billion.
It would not be possible without the Ethereum network and smart contracts that allow programming and tracking value exchange agreements between two participants with no intermediaries. Although the Bitcoin protocol also minds smart contracts on the Rootstock technical layer, its integration is still at a very early stage.
To make some conclusions, it is likely that we will have two economic systems — decentralized and centralized (custodial). Both will have their utilization methods in transfers, asset value holding, lending, crowdfunding, etc. Today, the era of smart contracts has not yet accelerated, so the next five years will drastically change the financial industry and the economy itself.
- Cryptocurrency skeptics note the lack of regulation as one of the most significant issues. What is your opinion on whether any regulatory tools should emerge?
With the introduction of The European anti-money laundering directive (AMLD5), cryptocurrency companies became regulated. A separate status has been created for such companies to engage in virtual currency storage and exchange activities. Guidelines are set internationally by the Financial Action Task Force (FATF). In Europe, such companies must ensure that the prevention of money laundering and terrorist financing is respected.
With the 6th anti-money laundering directive proposed by Spain, the responsibilities of companies working with cryptocurrencies can be further extended, including the maintenance of capital adequacy balance sheets. Some U.S. states have even stricter regulations, for example, New York, which issues BitLicense. Such a license is quite complicated to obtain to offer services there.
Although some crypto services are less regulated, public authorities still see their importance and growing influence. As a result, there is an increasing focus on both legislation and regulation, and new laws and guidelines are being developed to protect investors and consumers’ interests. However, there is still a long way to go to create a coherent system.