In Light of Central Bank Easing, Bloomberg Is Bullish on Bitcoin

Bloomberg has recently released its commodity index and outlook, which shows some support for Bitcoin. The report went on to say there is reason to believe future commodity prices, with the exception of Bitcoin and gold, will continue on a downward path. Although Bitcoin is not a commodity, it is included in the June 2020 report.

The Bloomberg report contrasts with a recent comment from Goldman Sach’s.  The company noted that Bitcoin is not a suitable investment. The report went on to state that all cryptocurrencies lack scarcity, cash flow, and are not seen as a hedge against inflation.

The June 2020 report from Bloomberg could not have been more opposite. In the opinion of Bloomberg, gold and Bitcoin are two assets that are building foundations for future growth and price appreciation.

Gold Appreciation is no Surprise

In an environment of central bank easing, it is logical to expect gold to outperform other assets. Bloomberg foresees gold maintaining its position. Bloomberg suggests that central bank easing is a valid reason to use gold as a hedge.

Both Gold and Bitcoin are scarce commodities. In the past, scarcity has always been useful as a hedge against inflationary pressures as well as economic easing. For precisely the same reasons that Bloomberg is positive about gold, it also is looking for a bright 2020 for Bitcoin. In its June report, Bloomberg stated that gold and Bitcoin remain their leading candidates to advance throughout the year, with COVID-19 adding more fuel to the rally.

Bitcoin is a “Resting Bull”

Bloomberg was also quoted as saying that Bitcoin is akin to a “resting bull.” The June report presents a case where both gold and Bitcoin are tools against inflation, and that they should increase in value in the event of a stock market decline.

To stem the appreciation of Bitcoin, Bloomberg feels it would need a significant event to destroy the confidence in the integrity of the protocol. A scenario that could weaken investor confidence could be a “double-spend” attack. This scenario is unlikely to happen as it is premised on one entity’s control of 51 percent or more of the network. Should this unlikely event occur, the entity would take control and spend the same Bitcoin more than one time. With the ever-increasing computing power of Bitcoin, this scenario is unlikely as the cost to achieve it is significant.

Wall Street Is Polarized over Bitcoin

The current outlook for Bitcoin is dividing global financial institutions. Many of the largest banks in the U.S., including Bank of America, JPMorgan Chase, and Wells Fargo do not accept crypto transactions. Goldman Sachs has a crypto trading desk. Although Goldman Sachs gas denounced Bitcoin and other crypto’s, it does allow transactions in these alternative currencies.

Options on the future value of Bitcoin seem to be at both extremes. Some hold on to the argument that Bitcoin holds no real value. Others, like Bloomberg, think the cryptocurrency will appreciate. This is but one example of the differing opinions of two camps.

Since Bitcoin broke onto the market, many have deemed it worthless or worse yet, a scam. Warren Buffet is quoted as saying Bitcoin was probably “rat poison squared” and that is nothing more than a mirage.

Even with the doomsday comments Bitcoin draws, it continues in a positive direction. It has changed the opinions of some in the financial world towards the “bullish” side. Bloomberg expects to see Bitcoin continue to appreciate. Other companies such as Grayscale and Bakkt were founded on the back of crypto, and are dedicated to it. With Bitcoin appreciating over 35 percent so far this year, it appears they may be right.