Bitcoin, the world’s largest cryptocurrency by value, could be worth more than gold if its value tops $100,000 as expected in the next five years.
In a research note Goldman Sachs’ co-head of foreign exchange strategy, Zach Pandl, was reported as writing that if Bitcoin’s share of the ‘store of value’ market rose to 50 per cent over the next five years its price would increase to a little more than $100,000.
Goldman Sachs’ Pandl assumed bitcoin would increase in value by between 17 and 18 per cent a year including compound growth; store of value is a term used to describe assets that tend not to depreciate in value, which includes some precious metals such as gold.
Goldman estimated Bitcoin’s market capitalisation at around $700bn. To overtake the value of all gold available for investment it would need to surpass $2.6trn.
Bitcoin, is now worth around $46,000 and it has increased in value by over 4,000 per cent in the last five years but it remains volatile. For example it was valued at $69,000 at one point last November.
Mining Bitcoin remains an environmentally challenging process as most Bitcoin ‘investors’ or miners require super computers that use large amounts of energy to generate the complex mathematical processes which create and secure new bitcoin.
Katharine Wooller, managing director of crypto wealth platform specialist – Dacxi said Bitcoin was already ‘heir apparent’ to gold.
She said: “Like gold the supply is capped and it is easier and cheaper to store.
“Already a plethora of hedge funds, banks and assets managers are purchasing bitcoin as a hedge against future inflation. If only a small percentage of the worlds’ audience switch their use of cold to bitcoin the price will easily sail through $100,000.
“Despite a lacklustre fourth quarter in 2021, and missing this crucial threshold oft postulated by stock to flow theorists, I would be surprised if bitcoin doesn’t hit this milestone by mid 2022 in the light of ongoing Covid ecomomic distress.”
She said that Bitcoin’s increasing value would encourage would-be investors to plough into crytpocurrencies.
“Remember there are thousands of crypto coins out there and many do rise to the top so long as investors are prepared to “HODL” or hold on for dear life.
And Of course if bitcoin does rally to $100,000, buyers do not need to purchase a whole bitcoin, and many retail investors are looking to purchase small amounts of crypto for reasons for diversification. We see many new crypto users purchasing with cash, or via a pension or ISA, sometimes with as little as £100 to put a toe in water of digital assets.”