But it should be clear that extreme scenarios are possible in such an environment (inflation, stagflation, inability of the Central Banks to significantly raise interest rates, etc.). Major asset manager and ETF provider VanEck recently looked into how this new geopolitical shift could affect financial markets and the composition of reserve currencies as various central banks seek to diversify their foreign exchange holdings.
The authors of the review see this as a significant upside for Bitcoin and gold. “As a result, the upside potential for gold and bitcoin is dramatic. Gold could rise in price to about $31,000 an ounce, and bitcoin to $1.3 million,” the analysts said in their report. “Precious metals are the initial reserve asset and cryptocurrencies are a possible addition.”
VanEck analysts note that this is the first time in recent history that significant economic sanctions have been imposed against a world power. VanEck developed his price scenarios for gold and bitcoin by comparing current gold stocks with the global money supply M0 and M2. The asset management firm noted that there are many Central Banks that have no gold in reserves at all. For example, the estimated price of gold in Japan would be close to $200,000. For the UK, the estimated gold price will be over $133,000.
“Among all the countries in the world, Japan stands out from the general background. She has a lot of money in circulation and very little gold,” analysts say. “The UK is another mature market with very low gold reserves relative to monetary liabilities. China's gold reserves also appear low relative to its monetary obligations."
In other words, these currencies will be particularly vulnerable, even if it may be doubted that the reported Chinese gold reserves correspond to the real ones. Using the same calculations based on the global money supply M0, VanEck sees the maximum price of Bitcoin at $1.3 million.
At the same time, based on the M2 global money supply, the price rises to $4.8 million. Although bitcoin has significantly more upside potential than gold, VanEck believes that Central Banks will likely prefer to own the precious metal. not digital currency.