Has Bitcoin Emerged As The New Gold Standard?

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Once upon a time, the value of money was underpinned by gold. But the days of the gold standard are long gone, leaving us with fiat money that has value because we all believe in it. 

It has become something of a cliche to say that Bitcoin or another crypto will replace gold as a trusted store of value and a globally accepted currency that works like more the gold standard than fiat money.

Yet some powerful voices are now joining the chorus of crypto boosters and suggesting that Bitcoin has a truly golden future. 

Goldman Sachs has predicted that the price of Bitcoin could soon crash through its all-time high and soar to $100,000 as more investors recognize it as an alternative to gold.

However, for this to happen Bitcoin would need to dominate half of the “store of value” market.

“Bitcoin currently commands a roughly 20% share of the “store of value” (gold plus Bitcoin) market,” analysts wrote. “We think that Bitcoin’s market share will most likely rise over time as a byproduct of broader adoption of digital assets.

“Hypothetically, if Bitcoin’s share of the “store of value” market were to rise to 50% over the next five years (with no growth in overall demand for stores of value) its price would increase to just over $100,000.

“Bitcoin may have applications beyond simply a “store of value”—and digital asset markets are much bigger than Bitcoin—but we think that comparing its market capitalization to gold can help put parameters on plausible outcomes for Bitcoin returns.”

People in the gold industry do not seem to be unduly worried about the rise of Bitcoin. Mark Bristow, chief executive of Barrick Gold Corp, the world’s second-largest gold mining company, said that gold was not going to tarnish any time soon. 

“Look at gold and its precious nature, you can’t print it and you can’t make it,” he said. “You can make cryptocurrencies, and there are many of them.” 

Craig Wright - a controversial figure who has claimed to be Bitcoin inventor Satoshi Nakamoto - recently published a blog about gold. He said that the “people behind many traditional systems” want Bitcoin to become digital gold because they want to control it. 

“In the age of gold-backed money, people didn’t exchange gold coins,” he wrote. “The reality is that gold rarely moved. Instead, gold would be held in banks and vaults, and the notes referencing ownership would be exchanged. The gold wouldn’t move. It was rare that gold moved out of central depositories. In the United States, Fort Knox was famous for holding gold. Such is the paradigm that many in the BTC or cryptocurrency industry want to create.”

He went on to say that the ”banking system associated with gold ended up having notes worth far more than the amount of gold available on earth”. 

“In part, this is why the United States moved away from the gold standard, or, more correctly put, the gold exchange standard,” he continued. “In reality, there was never a gold standard in use. The system I’m describing was banking offset on promises of gold held in a depository.

It is the same system that people are creating in an effort to replace Bitcoin. Bitcoin threatens people. A lot of industries will have to change because of the new innovation that Bitcoin brings. As a consequence, many industries are trying to find ways to turn Bitcoin into something else. They want to make digital gold. Bitcoin isn’t digital gold. It’s cash.”

The price of gold has remained reasonably stable over the past year, starting 2021 at roughly $1,850 per ounce and now sitting at just over $1,800. 

At the beginning of last year, one Bitcoin was valued at about $35,000 and has now risen to $41,882. 

Gold's market capitalization is currently about $10 trillion, whilst the global crypto market cap is around $2 trillion, with Bitcoin accounting for $808 billion of this total. 

 

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