Bitcoin and cryptocurrency prices pulled back this week.
The bitcoin price dropped below $44,000, losing about 7.7% of its value. Other major cryptos are also in a downtrend. Ethereum’s price dropped 5.4%, BNB 3.7%, terra 0.3%, solana 5.63%, cardano 10.4%, and XRP 10.5%, and dogecoin 0.1%.
Now, there are a few isolated, yet seemingly connected, developments that sparked wild speculations about a monumental role bitcoin could play in the global financial system in the long run.
First, Russia is tossing around the idea of accepting bitcoin for its fossil fuel exports. Last week, Russia’s energy minister Pavel Zavalny said “friendly” countries, including China, could be allowed to buy gas and oil in their currencies or bitcoin.
“We have been proposing to China for a long time to switch to settlements in national currencies for roubles and yuan,” said Zavalny. Later he added: “You can also trade bitcoins.”
[Ed note: Investing in crypto is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Another big move took place in the “land down under”—Australia.
On The Run, an Australian company that owns over 170 BP stations, will let its customers pay for gasoline in bitcoin. It will be the largest retailer in Australia to accept crypto. It’s partnering with Singapore-based trading firm Crypto.com to roll out processing terminals to facilitate these payments.
Marcus Sotiriou, analyst at digital asset broker GlobalBlock, thinks that this could be the beginning of bitcoin’s emergence as a neutral “petro-asset”. “This adds more weight to the idea of bitcoin becoming a petro-asset after Putin recently allowed ‘friendly’ countries to pay for oil in bitcoin,” he wrote in a note.
For much of the past century, oil has exclusively traded in dollars, which cemented the currency’s status as a reserve currency. This is why the dollar is often dubbed the “petrodollar”
But as I wrote last month, “the basis of this system, which has operated for the past 50 years, is being called into question. An article by Wall Street Journal writer Jon Sindreu, for example, said the sanctions on Russia, which showed that reserves accumulated by central banks can simply be taken away, raised the question of “what is money?”
This has led Russia and its ally China to consider neutral oil payment alternatives to the dollar. And BitMEX co-founder Arthur Hayes believes that gold, or even bitcoin, could fulfil this need.
“A new neutral reserve asset, which I believe will be gold, will be used to facilitate global trade in energy and foodstuffs. From a philosophical standpoint, central banks and sovereigns appreciate the value of gold, but not that of bitcoin… Bitcoin is less than two decades old. But don’t worry: as gold succeeds so will bitcoin.”
In the long run, Hayes expects gold to reach $10,000 on the spot, which, he thinks, would make hard money assets, including digital ones, more valuable. If gold hit that mark, Hayes believes the bitcoin price could be bound for $1 million per coin:
“As gold marches its way above $10,000, bitcoin will march its way to $1,000,000. The bear market in fiat currencies will trigger the largest wealth transfer the world has ever seen.”
Blackrock CEO, Larry Fink, too, thinks the war will accelerate the adoption of digital assets, although he didn’t specify any cryptos or targets:
“The war will prompt countries to re-evaluate their currency dependencies… Even before the war, several governments were looking to play a more active role in digital currencies and define the regulatory frameworks under which they operate,” he said.
Bitcoin has come a long way.
Not so long ago, Wall Street laughed off this cryptocurrency as history’s biggest fad. And lawmakers considered bitcoin as mainly a tool by drug dealers, money launders, and other seedy characters.
Today it’s increasingly endorsed as a store of value by some of the most renowned fund manages. And the world’s third-largest oil exporter is considering it as a settlement currency for its ~$300 billion energy exports.
That said, such tectonic shifts usually take a long time to play out. And they are very hard to predict. But the mere fact there’s talk of the “petrobitcoin”, however far-fetched—is a sign this crypto is maturing as a monetary unit.
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