Is Bitcoin the new gold?

livemint.com:

In a research note last week, Goldman Sachs stated that Bitcoin could probably be the new gold.

And if that was not shocking enough, tt went on to predict that bitcoin has the potential to cross the US$100,000 mark in coming years.

That, by the way, is about 2.5x the current price of a Bitcoin.

No wonder that after a two-year break from dealing with cryptocurrencies, Goldman reopened its cryptocurrency desk in 2021.

Since then, it has been carefully monitoring the blockchain and its ability to use crypto as a hedge against inflation.

Goldman Sachs said...

Bitcoin may have applications beyond simply a "store of value".

What does that mean?

A store of value means that an asset can maintain, or has the potential to maintain its worth, unaffected by time, or how long the market has been running.

Gold is a great example of store of value.

Goldman Sach's analysts estimates that the proportion of bitcoin in a portfolio will only increase with time.

If Bitcoin is able to claim a 50% share of the 'store of value' allocation, the price would pretty much exceed $100,000.

Why Goldman Sachs would dip their toes into this debate at all...

The total market cap of Bitcoin is a little over $700 bn. Gold is about $2.6 tn.

This suggests that Bitcoin is already at over 25% of the total market for "store of value". Of course, we are assuming these are the only two options, and...both are a store of value.

But let's get back to the key point.

Does Bitcoin have the potential to replace gold?

In 2021, the price of Bitcoin jumped an overwhelming 60%.

Gold, on the other hand, fell 3.6%. It's worst performance since 2015.

That's quite a divergent performance.

Having said that, gold and Bitcoin share two traits.

#1 Both do not pay any interest