Bitcoin Could Reach $ 100,000 If Investors Treat It Like Gold, Says Goldman Sachs

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Bitcoin’s publicly available float is just under $ 700 billion. The time of dreams

Bitcoin could be worth $ 100,000 if investors accept the assumption that it really is digital gold, according to a report by Goldman Sachs.

At its current price of around $ 46,800, Bitcoin has a market cap of $ 870 million, compared to $ 2.6 trillion for gold held by the public for investment purposes, such as private bullion. and assets in exchange traded funds.

The publicly available float of Bitcoin is just under $ 700 billion, as a considerable amount of Bitcoin is not traded, according to Goldman. This implies that Bitcoin consists of 20% of the total value of the Bitcoin market plus gold, assuming gold at current prices is around $ 1,800 per ounce with 44,000 metric tons in circulation at investment purposes.

Bitcoin could reach $ 100,000 if its market share in the store of value market increases to 50%, estimates Goldman analyst Zach Pandl. We believe that Bitcoin’s market share will most likely increase over time due to the wider adoption of digital assets, he wrote in a note released Tuesday.

Reaching $ 100,000 implies that Bitcoin would see annualized returns of 17% over the next five years. The target does not assume growth in demand for valuable storage assets, and it does factor in the growth in Bitcoin’s supply, with around 900 coins minted every 24 hours at the current production rate (predicted for halve at the start of 2024).

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However, Bitcoin will not be entitled to $ 100,000 if it ever gets there. The consumption of networks of real resources can remain a significant barrier to institutional adoption, writes Pandl, with a nod to the toll of energy consumption that Bitcoin mining takes.

This is not an easy task. Many countries are trying to reduce their carbon emissions, and Bitcoin mining, a global network of computers processing transactions, is not helping. Bitcoin miners consume 0.56% of the world’s electricity consumption, an amount similar to that used by countries like Norway or Sweden, according to the Cambridge Bitcoin Electricity Consumption Index.

Some of this energy comes from renewables, but Bitcoin is also mined from power plants that run on coal, oil, and natural gas. And it’s getting harder and harder to justify in countries facing crippling energy shortages and soaring prices.

In Kazakhstan, where mining took off after China banned the practice, protesters stormed government buildings on Wednesday amid skyrocketing energy prices. The country’s telecommunications provider has shut down internet access, cutting off Bitcoin miners.

Bitcoin can be much more attractive than other cryptos as a store of value, given its supply cap. But it also competes with other cryptos for investment dollars. The global market is worth $ 2.2 trillion, including $ 450 billion in Ether and $ 85 billion in Binance Coin. And unlike many cryptos that find uses as smart contracts to trade cryptos, lend and mint new digital assets like non-fungible tokens, the primary use case and allure of Bitcoins may be an alternative to gold.

Working in favor of Bitcoins is that investors are now worried about inflation and the impact of the skyrocketing global money supply, which could cause national currencies to depreciate. This could help Bitcoin in the long run, since its supply is capped at 21 million coins, of which 18.9 million have already been produced.

But Bitcoin hasn’t acted as an inflation beater lately. Prices have been stable for months.

Bitcoin has outperformed gold over the past year: Bitcoin is up 15% from the start of January 2021, compared to a 6.8% drop for the SPDR Gold Shares ETF (ticker: GLD) . But gold has beaten Bitcoin over the past three months, with ETF Gold Shares up 6% and Bitcoin falling around 10%.

Timing, it seems, can matter as much with digital gold as with real gold.

Write to Daren Fonda at [email protected]

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