Goldman Sachs says Bitcoin’s price could exceed $100,000 if it replaces gold as a store of value.
Goldman Sachs: #Bitcoin will take market share from gold and reach $100K.
— Bitcoin Archive (@BTC_Archive) January 4, 2022
Summary
Goldman Sachs compares Bitcoin and gold
This is revealed by Fortune according to which Goldman Sachs Group believes that Bitcoin will continue to take market share away from gold as a result of wider adoption of digital assets, making it possible to reach the now mythical $100,000 threshold.
According to Goldman Sachs, the current market capitalization of Bitcoin, adjusted for free float, is just under $700 billion, instead of the theoretical $880 billion.
In contrast, the gold available for investment is estimated to be around $2.6 trillion, so overall 21% of the market’s reserves would currently be made up of Bitcoin, with the remaining 79% made up of gold.
However, if Bitcoin’s share of this market were to rise to 50% over the next five years, for example, its price would increase to just over $100,000, and it would have a compound annualized return of 17% or 18%.
It is worth noting that during 2021 Bitcoin’s peak capitalization was $1,278 billion which, adjusted for the free float, would give around $1 trillion. This means that at the beginning of November, BTC’s market share of the world’s reserves of value came to 27%.
Goldman Sachs also says that the consumption of real resources by the Bitcoin network could theoretically be a barrier to institutional adoption, but this will not actually stop demand for the asset at all.
Bitcoin, the digital gold
Bitcoin is often regarded as a kind of “digital gold”, because like gold it does not pay interest or dividends and does not mimic the performance of more traditional assets. However, Bitcoin differs markedly from gold in its degree of risk, low for gold but high for BTC.
This difference, due to the high volatility of its price, could also be a kind of competitive advantage against other store-of-value assets, because it allows speculators to potentially gain more than they could by speculating on the price of gold.
For this reason, it is possible that Bitcoin does not actually compete directly with gold in the store of value market, but is a complementary, risk-on option to gold, not a competitor. If gold is by far the most widely used risk-off store of value in the world, Bitcoin could over time become the most widely used risk-on store of value, and perhaps even reach the heights hypothesized by Goldman Sachs.
