Bitcoin (BTC), which saw a remarkable double-digit rise this year, has struggled to break the $45,000 resistance recently. This level is not historical significant as it has been broken multiple times. This is also true for Bitcoin’s $850 Billion capitalization. It’s not even close to silver’s $1.4 Trillion or Amazon’s $1.7 Trillion market value.
Bitcoin’s market capital is often compared with gold, which currently has a $12.3 trillion global value and is the largest global store of value. The reason for the $45,000 resistance could be found in the comparison of BTC and gold by institutional investors. It is possible to see that Bitcoin’s 93% discount in market capitalization is justified by looking at the assets under management of institutional investor funds and daily trading volume.
This is the “digital gold” thesis.
Cointelegraph has previously covered Bitcoin’s many uses, but its main feature has been that gold is a digital storehouse of value.
For many reasons, governments around the world have tightened financial controls. This could increase the decentralized and self-sovereign advantages of cryptocurrency. China’s social credit system has placed offenders on a social credits blocklist. This will prevent them from getting loans or using the transportation system.
Canada’s recent, but short-lived Emergencies Act granted financial institutions the power to suspend bank accounts of protesters. There were no civil liabilities and they could do so on February 15. This week, Russians were sanctioned by payment services such as Apple Pay or Google Pay.
These events could make it even more pertinent to analyze the market capitalization of Bitcoin and gold.
The most valuable global tradable assets Source: 8marketcap.com
The above data shows that BTC’s $837 million market capitalization currently equates to approximately 7% of the price of gold. It is important to compare the daily volume traded and institutional holdings of these markets in order to assess their value.
Although cryptocurrencies are well-known for their exaggerated exchange-traded numbers and other providers such as Nomics have adjusted volume calculations, Nomics is not one of them.
Amount of 30-day volume on March 2, USD Source: Nomics
Above data indicates that Bitcoin has a $304 billion daily exchange volume, equivalent to $13.5 million per day. Exchange-traded products such as the Grayscale Bitcoin Fund (GBTC) added another $0.4 billion daily liquidity, according to CryptoCompare’sFebruary 2022 report. Bitcoin’s average daily volume is currently $13.9 billion.
Daily trading volume average USD billion Source: gold.org
According to GoldHub there is $170 Billion in gold liquidity daily, which includes registered over-the counter transactions. This includes regulated futures markets, and gold exchange-traded goods. Bitcoin volume is currently about 8% of gold’s.
The bitcoin ETF is more popular than the gold ETF
The number of exchange-traded Bitcoin products, such as Grayscale GBTC or exchange-traded notes has increased significantly. There are now $37.8 Billion in assets under management in Bitcoin exchange-traded product. This is equivalent to 4.5% the current market capitalization of $840 million for cryptocurrency markets.
USD. Total Bitcoin-listed investment vehicles Source: Funds, Bloomberg, ETF.com
According to GoldHub data, $221.2 billion in gold-backed ETF products were sold on February 25, according to GoldHub data. The remaining market capitalization is $6.0 trillion, excluding the 61% aggregate non-financial use of gold (jewelry and industrial, etc.). The fund’s exchange traded investment vehicles represent 3.7% of adjusted gold’s market price.
Bitcoin’s average volume of trade and institutional investors’ holdings are approximately equal to gold’s at $45,000. The $850 million market cap might not be an immediate concern for investors. However, there are other emerging uses of the cryptocurrency, including El Salvador’s micropayment channels, which use Lightning Network technology.
The “digital gold”, which is a small part of Bitcoin’s value model, will be less important to traders. Therefore, the $45,000 price should fade away.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.