Goldman Sachs Predicts Price Of Bitcoin Could Soar Past $100,00 If It Replaces Gold As A Store Of Value
With investors being more open to adopting digital assets, banker Goldman Sachs Group expects the cryptocurrency bitcoin to continue to capture market share from gold. This prediction has increased the probability of the often touted forecast that the value of bitcoin will break past the $100,000 mark.
According to estimates of Goldman, the float-adjusted market capitalization of bitcoin currently is just a bit lower than the $700 billion mark, which is about 20% of the “store of value” market – comprised of both bitcoin and gold’s value.
According to Goldman, the estimated value of all the gold assets available for investment is about $2.6 trillion.
In the eventuality that the store of value market of bitcoin was to go past the 50% mark within the next five years, theoretically, that should push up the price of the digital currency just beyond $100,00 and give the investors a return of 17% or 18% at a compound annualized value, Zach Pandl, co-head of global FX and EM strategy, said in a note to investors.
As of Tuesday, bitcoin’s trading value in New York was about $46,000 – after the virtual currency had surged by about 60% in 2021 alone. In November last year, bitcoin, the largest cryptocurrency by market value, touched $69,000.
To put the astronomical rise of bitcoin into perspective, its value has surged by more than 4,700% since 2016, The note from Goldman added that even though the wider institutional adoption of bitcoin is being hampered by the network’s consumption of natural resources, it will not hinder demand for the growing digital asset.
For a long time, bitcoin has been considered to be digital gold. The situational imperatives are applicable for gold and also applicable for bitcoin. For example, just like gold, no interest or dividends are paid to investors by bitcoin, and both the assets do not follow the performance trajectory of more traditional assets. Investors should consider that bitcoin, just like gold, also serves as a hedging tool against the systemic abuse of fiat currencies, say digital currency advocates.
A couple of days ago, Goldman Sachs had said that more liquid options markets would be the next major development for cryptocurrencies in general since more interest in the rapidly growing asset class is being shown by a larger number of traditional financial firms.
“We are seeing a lot of demand for more derivative-type hedging,” Andrei Kazantsev, Goldman’s global head of crypto trading, said Thursday during a CoinDesk-hosted panel discussion. “The next big step that we envision is the development of options markets.”
According to Kazantsev, digital asset derivatives are in their “infancy of product scope” compared to the more traditional markets such as equities or foreign exchange. However, he noted that over the past couple of years, there had been fast growth in the bitcoin options market.
According to data from Skew, a subsidiary of Coinbase that tracks data on cryptocurrency derivatives markets, open interest in bitcoin options, or the total value of outstanding contracts was at almost $12 billion. However, the market rarely exceeded $2 billion as recently as the first half of 2020.