The capitalization of the $11 trillion gold market could provide the answer, as bitcoin’s current trading volume and the amount held by institutional investors appears to be equal to 10% of the precious metal’s numbers.
Technical indicators and derivative data provide interesting short-term insights. But to analyze cryptocurrencies in a broader context, we need to focus on market capitalization, precious metals and global assets.
More bitcoins than in 2017
Recall that the current turnover of 18.67 million BTC represents an increase of 11.2% compared to December 2017. Therefore, the use of unit prices for long-term comparisons can be misleading.
Bitcoin market capitalization, in billions of US dollars. Source: TradingView
The $1.1 trillion valuation represents a 250% increase since December 2017, when the market cap peaked at $327 billion. Thus, because of the additional issuance, this figure differs from the 200% increase in the face value of the sticker, which is $20,000 from the current $60,000.
Digital gold growth
Another important metric, the precious metal gold, has always been a proxy for the leading cryptocurrency. Although bitcoin has many applications, value retention has always been its main feature, while debate continues over its properties as a commodity and currency.
Nevertheless, with the US expanding its monetary base by 53 percent in the past 12 months to a staggering $5.25 trillion, the number of institutional investors looking to bitcoin as a safe haven against inflation has skyrocketed.
Legendary investors Ray Dalio and Paul Tudor Jones have compared bitcoin’s unique capabilities to those of gold, attracting even more attention from corporations, insurers and asset managers.
Therefore, the comparison with the capitalization of the gold market has become even more relevant.
The world’s most valuable asset. Source : 8marketcap.com
According to the above data, BTC’s current market capitalization of $1 trillion is about 10% of gold’s capitalization of $11 trillion. To assess how these markets compare, trading volume and ETF and ETN markets must be compared, in addition to institutional holdings.
Average daily trading volume, in billions of USD Source: gold.org
Daily gold liquidity is currently $183 billion, including over-the-counter (OTC) registered transactions, in addition to regulated futures markets and exchange-traded gold products.
Volume-to-date, transparent to Q2 2009 April, USD. Source: Nomics
At the same time, the daily volume of BTC is about $15.9 billion. Exchange products like the Grayscale Bitcoin Fund (GBTC) added $1.5 billion in daily liquidity, according to CryptoCompare. Thus, bitcoin’s average daily volume of $17.4 billion can be compared to about 9.5% of gold.
Gold ETFs and bitcoin exchange traded products
Many exchange-traded bitcoin products, such as Grayscale $GBTC and exchange-traded bonds, have experienced significant growth. According to CryptoCompare’s March 2021 report, $58.7 billion in assets under management (AUM) is linked to cryptocurrency products.
Gold held by ETF products. Source : gold.org
For example, of the $198.8 billion in gold ETF products, Bitcoin’s $58.7 billion represents 29.5% of that total.
However, a fair comparison must include physical stocks, the tool of choice for governments and banks. At the same time, the rules applicable to most fund managers require that exchange-traded products be used for BTC holdings, which creates distortions.
For example, central banks and the IMF own 35,197 tons of gold, equivalent to $1.96 trillion. Gold.org estimates that 44,384 tonnes are held by private investors, including the ETF markets, and worth another $2.47 trillion. All of this represents $4.41 trillion in gold held by institutional investors.
Bitcoin addresses with between 100 and 10,000 BTC. Source: Feelings
In the case of bitcoin, addresses with between 100 and 10,000 BTC own 48.9% of the supply, or $538 billion held by large investors.
With institutional gold holdings of $4.41 trillion, BTC has a performance equivalent of 12.2% and its current market capitalization is $1 trillion.
Yasin Elmanger, crypto asset analyst at Ark Invest, estimates that bitcoin could surpass gold’s $10 trillion market capitalization. As Mike McGlone, senior commodity strategist at Bloomberg, puts it:
Bitcoin meets the need for digital reserve assets in a low-yield world.
However, McGlone goes further, adding that the adoption of the crypto-reference as a global reserve asset has crossed a key threshold that could see the price of BTC reach $400,000 by 2021.
In summary, the average trading volume of bitcoin and the share of large investors is roughly equivalent to 10% of the gold markets. But while the $1 trillion market capitalization could be the tipping point for the next phase of bitcoin adoption, BTC could remain below $60,000 for some time to come, especially since some analysts believe the price won’t see a serious rise until later this year.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph. Every investment and every stage of trading involves risk. You should do your own research before making a decision.
frequently asked questions
How is bitcoin market capitalization calculated?
Market capitalization is calculated by multiplying the total number of bitcoins in circulation by the price of bitcoin. Bitcoin’s market capitalization has grown from about $1 billion in 2013 to a multiple of that since it became popular in 2017.
What is the value of bitcoin?
Bitcoins are valuable because they are useful as a form of money. … In short, there is math behind Bitcoin. With these traits, trust and acceptance are all that is needed to be valuable. In the case of bitcoin, this can be measured by the growing base of users, sellers and startups.
What is the market capitalization of gold?
According to current estimates, the total capitalization of the gold market is about $10.7 trillion. In contrast, bitcoin has a total market value of $1.1 trillion.
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