The connection between Bitcoin and gold can be traced back to the origin of Bitcoin. Although not mentioned in the Bitcoin white paper, Satoshi Nakamoto actually mentioned the rarity of gold in a Bitcointalk forum thread when he introduced the first version of Bitcoin (BTC) in 2009. This is to emphasize the importance of the limited supply of 21 million bitcoins.
Bitcoin’s market capitalization regularly rivals that of gold, which is worth $12.8 trillion in total, and many cryptocurrency experts often point to the approval of a gold exchange-traded fund (ETF) in 2004 as a catalyst for the asset’s price appreciation.
Currently, Bitcoin is encountering resistance at the $30,000 mark, and whether it can break through that level may depend on how institutional investors view BTC versus gold as a store of value.
Bitcoin’s current market capitalization of $570 billion surpasses traditional giants such as Visa, TSMC and JPMorgan Chase. However, it is still 55% behind silver and significantly behind gold, the world’s most important tradable asset.
This raises a key question: how closely linked are the prices of these two assets? Simply put, are their prices actually visibly linked?
This explanation becomes clear when Bitcoin’s heightened volatility is considered. For example, a 30-day correlation metric can go from positive to negative within a few weeks. This lack of consistent price linkage can be attributed to the relatively modest adoption of Bitcoin and the fact that investors are still grappling with uncertainty about its potential and practical adoption.
Investors and analysts continue to debate whether bitcoin’s decentralized nature and limited supply justify its role as a financial reserve, while others counter that its price instability hinders its viability as a medium of exchange. Still, there is no barrier to assessing Bitcoin’s market capitalization alongside major global stocks and other commodities.
Comparing Bitcoin’s market capitalization to gold reveals an interesting trend highlighting the 10% and 4.5% resistance levels, which may explain the $30,000 resistance level.
Bitcoin investment products and gold ETF
Bitcoin-related investment vehicles accumulated a total of $24 billion in July, according to CryptoCompare. This includes products such as the Grayscale Bitcoin Trust and exchange-traded notes from various providers. That equates to about 4.2 percent of Bitcoin’s current market capitalization of $570 billion.Even taking into account the more generous estimate of 1.66 million BTC It is said Held by institutional investors, it still only accounts for 8.5% of the total market capitalization.
In comparison, gold-backed ETF products were valued at $215 billion in June, accounting for just 1.7% of gold’s market capitalization. However, for a fair assessment of Bitcoin, it is worth considering holding physical gold, which is favored by governments and banks. At the same time, regulations often force fund managers to switch to exchange-listed bitcoin products, causing the discrepancy.
For example, central banks and the IMF hold 46,603 tons of gold, equivalent to $2.84 trillion. Private investment in gold bars and coins increased by 45,000 tonnes, worth an additional $2.74 trillion. Investors collectively hold $5.8 trillion worth of gold, or 45.2% of its market capitalization.
This analysis shows that Bitcoin has about 81% less adoption among institutional investors than gold as a store of value. This partly explains why Bitcoin’s market capitalization of $570 billion is 95.5% lower than that of the leading precious metal, gold.
Related: PayPal to Launch Crypto Hub for Select Users
Regardless of how Bitcoin is used as a store of value, it could succeed
Even without full adoption as an institutional store of value, bitcoin’s market cap could quintuple to $2.9 trillion. This surge may stem from the growing demand for decentralized digital exchanges. Bitcoin’s role as a global, censorship-resistant medium of exchange has come to the fore as the traditional financial system hits roadblocks.
Additionally, its growing integration into e-commerce and online marketplaces is likely to expand transaction volumes. Bitcoin’s scarcity and utility could create a self-reinforcing value cycle as individuals seek alternatives to traditional payments. This unique combination of factors means that Bitcoin’s price surge may not be solely dependent on institutional adoption as a store of value.
This article is for general informational purposes only and is not intended and should not be construed as legal or investment advice. The views, ideas and opinions expressed here are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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