Bitcoin vs Gold: Goldman says bitcoin will chomp on gold’s market share in 2022; price may hit $100,000 mark

Bitcoin’s float-adjusted market capitalisation is currently just under $700 billion, and it currently commands roughly 20% share of the “store of value” market, according to Goldman Sachs note.

Bitcoin price is also expected to clock the much quoted $100,000 mark if it’s share of the “store of value” market were to rise to 50%, Goldman Sachs analyst Zach Pandl said in a note this week. (File Photo: Reuters)

World’s largest cryptocurrency bitcoin will take away additional market share from gold this year, according to Goldman Sachs, pronouncing its support for the digital asset in the debate over the relevance of bitcoin over gold. Bitcoin price is also expected to clock the much quoted $100,000 mark if it’s share of the “store of value” market were to rise to 50%, Goldman Sachs analyst Zach Pandl said in a note this week. Gold has historically been considered a safe haven asset while bitcoin is seen as highly volatile.

Bitcoin’s “Store of Value”

“Hypothetically, if Bitcoin’s share of the “store of value” market were to rise to 50% over the next five years (with no growth in overall demand for stores of value) its price would increase to just over $100,000, for a compound annualized return of 17-18% (accounting for growth in Bitcoin supply over time),” according to the Goldman note.

Goldman said bitcoin’s float-adjusted market capitalisation is currently just under $700 billion, and it currently commands roughly 20% share of the “store of value” market.  ‘Store of value’ is a term used for an asset that maintains its value, rather than depreciating. Gold has long been referred to as a good store of value.

Gold slipped on Thursday and was down 0.5% at $1,801.08 per ounce, according to Reuters report, as of Thursday afternoon IST. Bitcoin is currently trading at $42,838.89 down nearly 8%, according to crypto price-tracking website CoinMarketCap.

“Bitcoin has remained in the sideways range of 40K-60K in almost 9/10 months of the last year. Bitcoin volatility also hit historically low, and annual return was also moderate as compared to its peers. All these pointers indicate that bitcoin has now matured as an asset. Bitcoin has become digital gold in the past two years,” Hitesh Malviya, Founder, itsblockchain.com, told Financial Express Online.

“In the past two years, bitcoin also managed to become a better hedge against inflation as compared to gold which validates its importance as a viable store of value alternatives for the future,” Malviya said.

Volatile asset vs safe haven asset

Portfolio managers, experts and retail investors have long engaged in debate over cryptocurrency’s relevance as a store of value in the last couple of years. 

On one hand, prominent Wall Street personality and billionaire Mike Novogratz, the longtime crypto bulls, have sided with bitcoin, even calling it digital gold. “Bitcoin is digital gold. It has won that lane. I think it will continue to be adopted and it will take more and more of gold’s market cap,” Novogratz said in an interview to CNBC in October.

On the other hand, experts like GraniteShares CEO Will Rhind, who runs the fifth largest gold ETF, beg to differ. Rhind said bitcoin and other digital assets may be siphoning some capital away from gold, but it’s too early to say if it’s because they successfully hedge against inflation. “With the market cap of bitcoin and other cryptocurrencies, absolutely, they are attracting capital,” Rhind said in an interview to CNBC in November. “To the extent that they’re attracting capital away from the gold market, though, I don’t know,” he added.

Stock broker and popular investor Peter Schiff have also weighed in on the debate and said bitcoin or fiat currency can replace paper currency but it cannot replace gold. 

(Cryptocurrencies are unregulated assets in India. Investing in them could put your money at risk. Please consult your financial advisor before making any investment decision)

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