Bitcoin’s Potential Market Share Relative to Gold
In recent years, there has been a lot of discussion about Bitcoin’s potential market share compared to gold. Jurrien Timmer, Director of Global Macro at Fidelity Investments, has conducted an analysis that sheds light on this topic. By examining the value of “monetary gold” and Bitcoin’s market capitalization, as well as considering the impact of halvings on Bitcoin’s supply, Timmer provides insights into the future dynamics of these two assets.
Gold Vs Bitcoin: A Comparison
Timmer’s analysis starts by estimating the share of gold held by central banks and private investors for monetary purposes, excluding jewelry and industrial usage. Based on data from the World Gold Council, Timmer suggests that monetary gold accounts for approximately 40% of the total above-ground gold.
Building on this estimation, Timmer proposes that Bitcoin has the potential to capture around a quarter of the monetary gold market. With monetary gold valued at around $6 trillion and Bitcoin’s market capitalization at $1 trillion, this would represent a significant shift in the global distribution of wealth.
Timmer also explores the impact of Bitcoin halvings on its price. Historically, halvings have had a substantial effect on Bitcoin’s value. However, Timmer raises the hypothesis that diminishing returns may occur in the future as the incremental supply of new Bitcoin decreases.
To illustrate this point, Timmer compares the outstanding supply and incremental supply of Bitcoin with those of gold. He demonstrates that the diminishing impact of halvings is likely to be more pronounced in the future as the number of coins available for mining dwindles.
Given this insight, Timmer suggests alternative ways to project Bitcoin’s price trajectory.
Price Projections for Bitcoin
Timmer introduces the concept of a modified Stock To Flow (S2F) curve to account for the diminishing impact of halvings. This curve overlays an asymptotic supply curve, representing the percentage of coins mined relative to the final supply cap, onto the original S2F curve.
Using a regression formula that incorporates PlanB’s original S2F curve and the asymptotic supply curve as independent variables, Timmer develops a modified S2F curve. This curve aligns more closely with the supply dynamics of gold and reflects a scenario in which Bitcoin’s scarcity advantage continues but its impact on price gradually diminishes over time.
Based on this modified S2F model and considering the supply characteristics of gold, Timmer generates hypothetical price projections for Bitcoin. According to his analysis, Bitcoin could reach approximately $100,000 by the end of 2024.
If Bitcoin were to capture a quarter of the monetary gold market, it would represent a significant shift in global wealth distribution. This gradual increase in demand would likely drive up the price of Bitcoin over the coming years.
Hot Take: Bitcoin’s Potential Market Share
The debate surrounding Bitcoin’s potential market share relative to gold has been ongoing, and Jurrien Timmer’s analysis provides valuable insights into this topic. By examining the value of monetary gold and Bitcoin’s market capitalization, as well as considering the impact of halvings on Bitcoin’s supply, Timmer presents a compelling case for Bitcoin’s future dynamics.
According to Timmer, if Bitcoin were to capture around a quarter of the monetary gold market, it could lead to a remarkable shift in global wealth distribution. This potential growth in demand for Bitcoin would gradually drive up its price over time.
While there are factors like diminishing returns from halvings to consider, Timmer’s analysis suggests that Bitcoin has the potential to continue its upward trajectory. As an investor or enthusiast in the crypto space, it’s important to stay informed about these dynamics and consider the potential implications for your own investment strategy.
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