- Bitcoin has gained popularity as the Federal Reserve has significantly increased the money supply.
- Ethereum is set up for a “perfect Goldilocks launch,” said the founder and CEO of Celsius Network.
- But altcoins, including surging Solana, are “extremely risky” and could crash.
COVID-19 disrupted everyday life, popularized the phrase “social distancing,” and changed the course of history. Inadvertently, it also played a critical role in meme stocks going as mainstream as masks, as well as introducing many investors to cryptocurrencies.
Emergency pandemic-era policies taken by the government to save the economy, including stimulus checks for most Americans and rock-bottom interest rates that spur spending, have buoyed stocks and fueled rapid corporate earnings growth.
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But a growing number of skeptics don’t view a spend-happy Congress and a Federal Reserve pushing ultra-accommodative policy as heroes. Instead, many see them as villains whose efforts may backfire and cripple the dollar’s value while inflation runs rampant.
“More and more people, they couldn’t explain to you what’s happening, but they know that something’s broken in our system,” Alex Mashinsky, founder and CEO of digital wallet firm Celsius Network, told Insider in a recent interview.
The Fed has drastically increased the money supply in the past 18 months, and Mashinsky said that 40% of all the dollars ever created were printed since the start of the pandemic.
That has sent investors flocking to volatile cryptocurrencies like bitcoin, which has a capped supply of 21 million, as safe-havens. Mashinsky reiterated a $100,000 price target for bitcoin as greater demand and slowing supply growth lead to the price the world’s first digital token doubling from current levels.
“So many people are frustrated or disappointed with our government printing money like crazy,” Mashinsky said. “They’re worried about the value of their dollars. They’re going to keep the store of value in bitcoin rather than in dollars.”
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Gold, long touted as an inflation hedge, hasn’t appreciated in value like it’s supposed to, Mashinsky said. He added that buying bonds is as risky as “picking a penny up in front of a steamroller,” given their low yields in a high-inflation environment.
As long as the Fed keeps buying bonds and expanding the money supply, bitcoin should have room to run, Mashinsky said. He added that the biggest risk to its bull case is that the Fed tapers, or slows, its bond purchases sooner than expected but said that’s unlikely.
“We’ve heard the Fed many times promise to taper, and yet they’ve never tapered,” Mashinsky said. “The day Jerome Powell made that announcement, the stock market was up — not down. Because everybody yawned and said, ‘yeah, right.”’
Ethereum ‘Goldilocks’ launch ahead
Mashinsky isn’t just bullish on bitcoin. He also owns ether, the ethereum network’s native token.
“Ethereum is like in the perfect Goldilocks launch,” Mashinsky said. “Why? Three things happened recently, that basically — I can’t say guarantee — but basically make it very hard for ethereum not to appreciate in value. So, we definitely think ethereum is going to $8,000 or $9,000.”
While ethereum doesn’t have a capped supply like bitcoin, it’s now a “deflationary currency” because of a protocol called EIP-1559 that lowers the supply of ether in circulation. Fixed ether supply compounded with higher demand is the main reason why Mashinsky is bullish.
The Celsius Network founder also cited two more reasons why ether should rise: ETH 2.0, a one-way wallet deposit where ether gets taken out of the market and lowers supply further; and lower balances on crypto exchanges, which reflects an increase in buying activity.
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“You have more demand, less new supply, less existing supply — higher prices,” Mashinsky said. “So that’s my rationale for $8,000 to $9,000 this year — by the end of this year — on ethereum.”
Watch out for trendy altcoins
Ether is set to surge and bitcoin is an important hedge that some have likened to digital gold, but not all cryptos will have the Midas touch.
Altcoins, or non-bitcoin cryptocurrencies, promise massive overnight gains but are highly volatile and are “extremely risky,” Mashinsky said. He isn’t the only one who thinks so — in a recent note JPMorgan’s digital assets expert Nikolaos Panigirtzoglou warned that the surge in altcoin popularity could precede a disastrous decline.
“You know those pictures in India where there’s 500 people on a train? That’s what altcoins are,” Mashinsky said. “The train is ethereum, or the train is bitcoin, and everybody else just piles on and tries to catch the ride.”
One red-hot altcoin, Solana (SOL), is up 150% in the past 30 days. It’s soared “to the moon,” as retail traders say, but it may be falling back to Earth — Solana has declined 12% in the last five days after its network shut down for 17 hours earlier this week.
“I love Solana as a technology, but Solana has an extremely high valuation,” Mashinsky said. “So I’m not sure. From a risk-reward standpoint, I like ethereum much better than Cardano, Solana, or Polkadot or any of the NFTs (non-fungible tokens), for example.”
Instead of buying altcoins that promise to be the next bitcoin or ethereum, or what one crypto technician called “ethereum killers,” Mashinsky recommends investors stick to the originals.