He believes that rising adoption will drive 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 for cryptocurrencies as well, according to Frank Holmes, CEO of U.S. Global Advisors.
In a Monday interview with Kitco News, Holmes said he expects digital assets such as Bitcoin (BTC) and Ethereum (ETH) to perform exceptionally well alongside gold. He believes that these digital assets are enjoying higher adoption because of their underlying value drivers.
Regarding Bitcoin, Holmes felt that more people are embracing the digital asset in a continuation of a multi-year trend:
“The number of wallets, people that are embracing bitcoin, that’s been growing for the past three years. Nice steady growth.”
Although many in the crypto industry liken Bitcoin to gold, Holmes said BTC isn’t being fueled by the same macro drivers as bullion. Rather, Bitcoin’s rocket fuel is coming from this past May’s deflationary halving event.
“If tomorrow, if all the gold mines in the world said we’re going to cut supply by 50%, I can assure you gold will be at $10,000.”
“It’s a supply-demand function,” Holmes concluded. Following the May halving, the number of newly mined BTC entering the market fell to around 900 per day — and this supply has been quickly absorbed by institutions and mega-corporations.
Ethereum, meanwhile, continues to benefit from the latest developments in decentralized finance, or DeFi. In terms of total value locked, the DeFi ecosystem is worth over $14.6 billion. Ethereum is the building block for much of that activity. The market capitalization of DeFi coins is currently $18.2 billion, according to CoinMarketCap.
In terms of gold, Holmes expects a “two-standard deviation” move for precious commodity — a move that could send prices between $400 and $800 higher in the next 12 months.
“That would take us from $2,200 to $2,600,” he said.
Gold futures broke out on Monday, climbing $26.40 to $1,866.40 a troy ounce on the Comex division of the New York Mercantile Exchange.