Grayscale, in addition to devoting himself to crypto derivatives, is also devoted to analysis, and this time he goes so far as to make a kind of prediction on the price of Bitcoin.
Grayscale’s prediction on the price of Bitcoin
Grayscale has been very active lately, especially with regard to the possibility of issuing spot ETFs.
The forecast is not about a precise figure that the price might reach, but about the effects that its eventual growth might have on Bitcoin‘s price, relative to that of other assets that are in some ways similar.
In particular, Grayscale compares Bitcoin’s market capitalization to that of gold, and states:
Thus, although not explicitly, it suggests that there is enormous room for growth for Bitcoin should it be able to partially take the place of gold within the financial markets.
Gold and Bitcoin
Right now the total market capitalization of gold ETFs is $214 billion, which is less than half that of Bitcoin.
However, the total value of all gold in trade is even close to $13 trillion.
In fact, most of the gold in circulation is physical, that is, used as raw material within a variety of products.
Specifically in the area of jewelry alone there would be gold in circulation with a total global value of more than $5.9 trillion. This is all the gold found in all existing jewelry in the world, not just the gold used each year to produce new jewelry.
In addition to this there would be gold bullion in circulation with a total value in excess of $2.6 trillion, and to this must be added another $2.2 trillion locked away in the vaults of central banks around the world, and $1.9 trillion in other contexts.
So although the market for spot gold ETFs appears to be smaller than that for Bitcoin, the market for physical gold is enormously higher, even by more than twenty times.
Bitcoin in theory for a certain type of use can serve as a substitute for gold, both in terms of spot ETFs and physical gold.
It is hard to imagine Bitcoin eroding much of gold’s market share, but 10% would be enough to make its current value multiply by three.
Grayscale to all this adds that Bitcoin, however, also has some specific uses that gold does not.
For example, it can be used as a medium of exchange (i.e., currency), whereas gold has not for many decades now.
It can also be used as a medium for settlement of financial transactions, which gold nowadays cannot do at all.
Note that Grayscale in this case compares Bitcoin to real, physical gold and not to its derivatives in the financial sphere.
From all this they infer that Bitcoin is likely to continue to grow as a store of value, capturing an even larger share of the global gold investment market, thanks in part and especially to increasing adoption with the use of BTC as a means of payment.
Although the price of Bitcoin is not specifically mentioned, this is for all intents and purposes a prediction, albeit an inaccurate one.
Grayscale: Bitcoin’s growth and the prediction of its future price
The key point then is growth, and in particular the growth of Bitcoin usage.
Grayscale Research says they are optimistic about the multiple paths that will lead to Bitcoin’s continued growth, which is why they predict it will nibble market share away from gold in the future.
They clearly state that they see it as an alternative to physical gold for certain uses, pointing out that in the financial arena Bitcoin actually has more use cases than the precious metal.
They then go so far as to explicitly state that there is substantial room for growth in Bitcoin’s valuation over time.
After all, in the 14 years of its existence, it has already evolved to over $500 billion in market capitalization, and so it is entirely logical to imagine that this growth could continue.
What emerges between the lines, however, is that this is slow growth.
Actually, while in terms of utilization this slow growth may be steady, in terms of market value it certainly will not be. Then again, volatility is one of the main characteristics that distinguishes BTC from gold, making it a more desirable prey especially for speculators.
While stock market speculators are unlikely to turn out to be particularly attracted to ETFs on physical gold, it is crystal clear that they are interested in Bitcoin.
With the launch of spot Bitcoin ETFs to the interest of speculators could also be added that of institutional investors, although the size of the market for physical gold ETFs would not suggest a particularly developed market from this perspective.
However, Grayscale says that Bitcoin should be able to compete with physical gold as well, and in this case the size changes a great deal.