Goldman Sachs analysts say Bitcoin could reach $100,000 in coming years if more investors begin to view the cryptocurrency as a store of value, making it a direct competitor with gold as a safe haven.
Bitcoin currently has a 20 percent share of the store-of-value market and a $700 billion market capitalization, compared to around $2.6 trillion worth of gold owned as investment, said Goldman Sachs analyst Zach Pandl.
In a hypothetical situation put forward by Pandl, if Bitcoin were to achieve 50 percent of the store-of-value market, this could push Bitcoin about 17-to-18 percent higher annually for the next five years to top $100,000.
Store of value usually describes assets that can maintain their worth over time without depreciating, such as precious metals and some currencies.
Pandl argued that Bitcoin will increasingly steal market share from gold, which has stalled out around $1,800 per ounce. While Bitcoin’s network consumption of resources may be an obstacle to institutional adoption, it will not stop the demand for the digital asset, he added.
Bitcoin will “most likely” represent a bigger proportion of the market over time, Goldman Sachs said in a list of 2022 predictions.
“Bitcoin may have applications beyond simply a ‘store of value’ and digital asset markets are much bigger than Bitcoin, but we think that comparing it’s market capitalization to gold can help put parameters on plausible outcomes for bitcoin returns,” Pandl said.
The Bitcoin v. gold argument has intensified over the past months, with Bitcoin gaining favor as an inflation hedge amid surging prices for goods and services.
In 2021, the price of Bitcoin rose around 60 percent while the price of gold fell 3.6 percent, marking the biggest annual decline since 2015.
The scarcity of Bitcoin theoretically helps it maintain its value like gold. The code underlying bitcoin ensures there can only be 21 million Bitcoins in circulation.
Bitcoin has been referred to as digital gold. It pays no interest or dividends, and it does not imitate the performance of more traditional assets. The criticisms levied at gold tends to apply to Bitcoin as well.
Hedge fund billionaire Paul Tudor Jones said in 2021 that Bitcoin was “winning the race against gold”. Advocates say Bitcoin, like gold, serves as protection against the systemic abuse of fiat currencies.
Photo: Studio shot of golden Bitcoin and mound of gold, Kiev, Ukraine, Sept. 19, 2017
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?