Topic: Bitcoin vs. Gold - is market cap parity utopian? (Spoiler, no!) - page 4. (Read 1100 times)

Its clear the idea of market cap is not a simple fixed target.   Gold was in a cyclical bull market before BTC even came into thoughts of Satoshi and today Gold reaches an all time high decades after.
   These two assets have another thing in common which is they both come with ridiculous targets higher, some say gold will be $10,000 an ounce and aren't joking.   For context the price was about 30 dollars per ounce beginning the seventies.

So there is alot of growth in gold past present and very likely the future.   Somehow we have to estimate if a fast car will be passed by BTC moving even faster.    I certainly think the peaks of BTC will exceed gold at some point, the sharp shape of BTC patterns and its ability to spike upwards can even put the commodity market to shame so peak price certainly.

The overall day to day of BTC being a stable market cap larger then gold would be a different consideration.  They both suffer alot of speculation which muddies the water.  I think both are bullish but if someone seriously said the price will half I would have to read the reasoning and timing as quite possible.

  Dollar itself has spiked upwards at times, its not a balanced situation and at times past USA has been 50% of global trade.  The dominance of USD was justified in those days but now I view DXY as about as stable as a melting iceberg, subject to dangerous alterations.  Invariably in decline, dont doubt it can turn on you and remains gigantic in its momentum & unavoidable when it moves.

   For starters DXY is a fake measure of value, its not reflecting real trade but both political and historic ties between countries.  With technology altering alot of the world beyond recognition its fair to expect BTC to do better of the two.  The majority of what I expect is volatility and erratic prices in all assets, instability favors gold which is probably rising upto this election result.  BTC benefits from weak dollar but will react differently to USD as it is a risk or speculative asset to most large market players.

It depends on how you define "winning". I suppose you refer to fiat currency. While USD is considered to be global reserve currency, I wouldn't call it a "winner" in terms of economic reality. People who save on the dollar are losing.

The best money will always rise to the surface. The market mechanism is simply too powerful to ignore, regardless of whether this world is governed by bureaucrats. If a bureaucrat says that bananas is good money, it doesn't make it good. It just makes anyone hearing him poor.

Even though you are probably correct in your conclusion that bitcoin is like gold but more than gold, your description of bitcoin being a store of value and a hedge against inflation does not differentiate bitcoin from gold since gold is also those two things.

What differentiates bitcoin from gold is that it is better money than gold.  
As compared with gold, bitcoin is:
1) more verifiable,
2) more divisible,
3) more easy to transport
4) more flexible in terms of programability
5) more scarce
6) less burdened by third party costs - including being able to secure..
7) and yeah there are probably a variety of other things, but who cares?

The above list is enough to establish bitcoin as not ONLY a little bit better than gold but likely in the territory of around 1,000x or more better than gold, even though bitcoin is currently ONLY about 1/15th the price of gold (in terms of total market cap)..  so if we might realize that currently, bitcoin is around 30,000x undervalued as compared to go, then we should be able to identify that bitcoin is a buy as compared with gold.. yet at the same time, even though through the past 13-ish plus years, the market has been facilitating the catching up of bitcoin to gold in terms of its market cap growing relative to gold's market cap, yet it surely could still take the market another 50-200 years to sort out these matters in terms of people realizing the fair market value of each of them relative to one another and also it may not be clear if gold has to come down in its price/value or bitcoin has to go up in price/value or a combination of both.

Sure, people are going to have differing opinions, and if you conclude that the current market value of bitcoin as compared with gold is fair or that bitcoin is overvalued as compared to gold, you seem to be living in fantasy land and/or denial like some of the loonies who believe either that you should have equal parts or that you should have more gold than bitcoin.. almost pure stupid, even though smart people believe that kind of nonsense, and also they hinge on the historical value of gold blah blah blah.. which seems also to be in a kind of selective denial and they are free to do whatever they want including likely coming around to the fact that governments and institutions are going to come around too. even though they are used to gold, why would they be holding the inferior money, since value gravitates towards the soundest of monies, which happens to be bitcoin if anyone had not realized and appreciated such factual matter.

what I meant by the statement "Bitcoin is Gold and more" is that like Gold it can be used as a store of value and hedge against inflation.

The US dollar became the official reserve because it was backed by Gold and was relatively stable.
Dominance of money is usually associated on how they can resist inflation.

I believe I understand what you were trying to convey. I am not sure about the phrase "Bitcoin is Gold and more" though. Bitcoin isn't gold, but it might be more than that. I understand there is some tricky rhetorics in my sentence. But I stick to it and since humanity values things in the name of value, bitcoin might indeed be soon more than gold.


Who claimed that a comparison is a definite need? I didn't. But I don't see a problem in comparing a plane with a bike. You can easily do that, crunch the numbers, look for carbon foot print, cost of maintenance, value generated and time saved, risk to die using one or the other, you name it. But since you already know it all, there is not much more from my side to add.

Thanks for the comment!


This is an interesting question here. Does best money always win? Or does most money in existence sometimes win because there are variables of control over the system and how the system is allowed to evolve?

But apart from that, I agree with you that in your and my opinion, bitcoin is at least the best competition we could hope for in the face of what we have right now.

Thanks for the comment!


How is it not proper to compare anything? I can compare asset classes, i can compare tools of any kind, I can compare SPVs, I can compare pretty much anything anyone wants for as long as they share at least one characteristic. I think bitcoin and gold do share at least one characteristic.

Thanks for the comment!


No one denies that? I don't know because I don't know everyone. Gold will exist forever because even if it ceases to be important, nobody would have interest in destroying it. This might be fundamentally different for bitcoin. But I personally believe that there have been tries to destroy or stop it, and the realization that there is no destroying or stopping bitcoin, the biggest players in the world instead decide to go with it. I have no hard evidence, but this is what I suspect.

Thanks for the comment!

No one denies that bitcoin is more profitable than gold because it is very small and has a lot of potential for growth. That is both the advantage and disadvantage of bitcoin because higher returns come with higher risks, everything is proportional to each other.

There is no guarantee that bitcoin will last as long as gold to be comparable to gold, everything is still unknown for bitcoin and when investing in it we are taking on greater risk. Gold, on the other hand, does not need to prove itself any further because it has proven itself for the past 1,000 years. Gold does not increase too quickly but is extremely stable and always ensures the value of our assets whenever the world is unstable.
Have you ever seen gold dumped 50-70% in the event of war, inflation, recession? But that happens regularly with bitcoin, an asset that is still considered high risk.

Bitcoin is the choice of those who are willing to take risks for high returns while gold will be the choice of those who are already rich and need a safe haven.

There are pros and cons when it comes to this aspect. Now, it is up to the investor how he gauge his chances here. But if possible, you can always invest in both to gain the benefits on these 2.
For most non-crypto users, definitely, they will go for gold. But for people here, they will surely include btc in their investment portfolio.
Getting the benefits of both assets will be a good thing. Besides, you are mostly likely considering other type of assets or already have other assets, if you can afford to.

It is not proper to compare these two assets because they are different from each other.
Of course, I know that gold market cap is 14x that of bitcoin, but gold have been in existence for a long period of time, and if bitcoin can be able to survive that long, the market cap will be bigger than that of gold. Bitcoin is still very young, and we can see how much profit it is giving to investors which is bigger than that of gold, and this is the reason why more people will continue adopting bitcoin overtime boosting its market cap.

What you say is just the thoughts and wishes of bitcoin investors, we still cannot know what will happen in the future and affirm anything. Looking at bitcoin's market cap at just over $1 trillion while gold is over $17 trillion, that's a huge gap and I think it will be very difficult for bitcoin to reach, let alone surpass.

To put it bluntly, gold is an asset that has been around for thousands of years, it has proven its strength through many wars, world economic collapses and still stands strong today. That is also the reason why it is always the top priority asset whenever economic instability occurs. Meanwhile, bitcoin is too young to be certain of anything, it is too volatile whenever the world is unstable, and it is not even globally legal yet. So it's too early to say it will surpass gold.

It's really simple in my mind. Best money always wins based on its properties, and specifically, based on the amount that is brought into circulation periodically. Gold took the best money throne, because it was the least inflationary, comparably to other metals, while inheriting the good properties, such as divisibility and durability.

Bitcoin will take the best money throne because it is completely resistant to supply changes. It's a matter of time before it surpasses gold in terms of market cap.

Apart from being inverse to Dollar I dont see why its a definite need to compare the two especially.   We dont compare BTC to oil especially or many other commodities.  It would be like relating car use and cost to riding a bike, not massively unreasonable but these two things are always intended to do different things and its clear they will always have their own advantages and disadvantages.

My very general take is this is peak dollar, we're at the top of FIAT currency dominating the world and how biased we are to politics instead of trade and business instead.   I do expect Dollar to decline as it becomes more obvious in its faults and unfit for use, Im not sure we are close exactly and I dont want to say there is some epic default event.   Yen should fail first, its lit red in even more ways yet Japan is a great country also so who knows how it turns exactly.

Bitcoin is Gold and more.
It's still Young it wouldn't be in parity but surpass the Marketcap of Gold.
Many are just getting to know about it and understand it's importance as a store of value and hedge towards inflation (gold).
Not to mention capacity and needs it can satisfy that Gold can't.

I have been reading a lot of posts in various threads and noticed many people can't imagine that bitcoin could be on its way to market cap parity with gold.

I thought I should take the time and have a look at some numbers and graphs in order to see what direction bitcoin is going and at what pace. I would also like to address those who can't let go of the idea that some shit coin could take over, crushing bitcoin dominance. That is why I begin my little presentation here with a graph about bitcoin dominance.



Everyone knows where the first significant decline in dominance came from. It was the shit coin craze in 2017 when bitcoin's market cap got considerably diluted while at the same time this led to many people in the space learning their first lesson. While 99(.99)% of the shit coins never recovered, bitcoin was just getting started. I remember people hoping for ethereum to take #1 and I think it was kind of a self-fulfilling prophecy that it was climbing in value so fast and so much because so many people thought the time has come, bitcoin is going to be dethroned. But I believe that some very smart and now even wealthier guys knew when to pull the plug. The closest that ethereum got to bitcoin was in June 2017.



And today.



I am not against coins other than bitcoin per se and everyone should invest as they please, but - and I admit it took me some time - I agree that bitcoin is the one to focus on. There might be use cases that are better served by some other coin, but bitcoin is the marker to monitor and understand how healthy or unhealthy, how promising or hopeless the overall state of the sector is.

Bitcoin's dominance today compared to earlier periods is interesting because it vastly recovered its dominance while being close to the ATH. This means proportionally significantly more money was invested in bitcoin despite rapidly rising prices, i.e. because of rapidly rising prices. Usually, bitcoin has a hard time keeping its dominance through bull market times as other coins often rise faster during good times and either or drop faster during bad times. Those who have their doubts, think about that. There are some folks claiming that smart money would leave bitcoin. There are other statistics that tell the opposite, but I leave that for another topic.

The following chart is displaying the gold-bitcoin correlation and provides an impression of how to understand the contemporary price development of the two asset classes.



It is charts like these why I understand that some folks can't grasp with ease why some people are very optimistic about bitcoin's price potential. The chart is designed such that both price scales fit in, correlation can be derived and the average user gets a first idea about correlation/ratios. But what you can't really see is the pace at which bitcoin caught up to gold. It's because bitcoin starts literally at zero and it is impossible to properly depict via the distances between the two graphs how mind-blowing bitcoin's growth has been. Ultimately, the graphs serve correlation calculation and only some number crunching helps to retrieve some further insights from the chart.

I have prepared a quick overview with excel. There are a few things I need to mention beforehand.

- I have taken all numbers from around July 20th for each year, give or take -2/+2 days.
- This means that I can miss ATHs and ATLs on a yearly basis. (Example: 2017, 2021, 2023)
- I have rounded where it made things easier, but without essentially skewing the result.
- I have taken the current bitcoin price and did not standardize it by adjusting current market cap by total supply
- I have standardized gold ounces: here it says that there are 208,874 metric tonnes. This translates into 7.336 billion ounces. I rounded it to 7.0 billion ounces and divided the price per ounce by 3, which provides the price per ounce assuming that instead of 7.0 billion ounces, there are now 21 billion ounces in order to match the current market cap of gold.
- I then took the unit mBTC instead of BTC. As mentioned above, I assume total circulating supply, which equals 21 billion mBTC. This led me to the calculation of the following table.



I used numbers and letters for the rows and columns because I thought it makes discussion here easier. If someone wants to point out a specific data point, please use the format letter;number.
I used some color below the table as I wanted to group some of the years. But as I said before, it isn't perfect as I neglected some of the yearly ATHs and ATLs, which would have had an impact as I didn't take yearly price averages, but specific price points. Though I did use the same time give or take and this provides us with some insight into the pace at which bitcoin developed.

In July 2010 the price of 1 mBTC was $0.00007 because the price of BTC was $0.07 divided by 1,000. To match the price of 1 ounce of gold, the required multiplier per mBTC was 5,661,904. In 2011, 1 mBTC matched 1 ounce at a multiplier of 38,880.

This is a huge jump and I think it is safe to say that most of this progress was due to geeks speculating like crazy (but still for a reason...). It stays around that until July 2012 although the bitcoin roller coaster never stood still. Who would have thought that 1 mBTC would ever cross $1, let alone $0.10?

In July 2013 the multiplier for 1 mBTC to match 1 ounce of gold dropped to 4,977. In July 2014 it dropped to 715.54. Now bitcoin went through a time of back and forth until 2016. In 2017, 1 mBTC crossed the $1 mark and the multiplier dropped to 162.62. This is the year where you can see that July price was far below that year ATH and the multiplier would have already been considerable lower. In 2018 it dropped to 50.24. Some back and forth until 2020.

In 2021 the multiplier drops to 18.45. In other words, 18.45 mBTC equal 1 ounce of gold. In 11 years, 1 mBTC dropped its multiplier to match 1 ounce of gold from 5,661,904 to 18.45. But this is not the end point yet as I haven't yet had the pleasure to coincidentally pick a price point close to the ATH. Since the peak is now holding for a longer period of time, the price per 1 mBTC close to its ATH now comes into play and reduces the required multiplier to 11.89 in July 2024.

1 ounce of gold is 11.89 times more valuable than 1 mBTC. If hypothetically 1 mBTC were to reach 933.33 and 1 ounce of gold is at $2800, parity would be reached. This also means that at parity (all things equal), bitoin (BTC) would have to increase by $33,000 to match a $100 increase in gold in order to maintain parity. More gold could be found, numbers might be off somewhat, you name it.

One of the most impressive observations here is that when 1 ounce of gold went from $1,189 in July 2010 to $2,388 in 2024, 1 mBTC reduced the required multiplier to match one ounce of gold from 5,661,904 to 11.89.

Private financial assets globally are estimated to be somewhere around $470 trillion. This is an important detail to know because many people think that gold as an asset class is so huge overall that it either has to shrink in order to allow bitcoin to grow, or bitcoin could never reach parity because there is not enough value in the world that could flow into the network. But rest assured, global bank deposits are on the decline and are shifted into securities and other financial assets like real estate and bitcoin. But there are still trillions threatened by devaluation and with time passing by, more and more people will be looking for alternatives and take the time to understand those alternatives. Bitcoin is one of them.

Whether money is being shifted from gold into bitcoin or not is a good question. I found some statements by banks saying that this is not the case, but keep in mind that banks would never undermine their own portfolio with implicit or explicit put or buy suggestions. But at the end of the day, my point is that gold money isn't needed in bitcoin in order for these two asset classes to reach parity. The pace at which 1 mBTC has fractionalized the required multiplier to match 1 ounce of gold is just mind-blowing.

With all the information out there, the need for borderless value mobility, verifiability and transparency, censorship-resistance, protection against inflation and so on and so forth, I can't see any plausible reasons as of yet why this magnificent chase for parity should come to an end anytime soon.