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Bitcoin to seize quarter of gold market in $500bn surge, Fidelity exec says

Bitcoin to seize quarter of gold market in $500bn surge, Fidelity exec says
Markets
Bitcoin total value seen increasing to $1.5 trillion, according to stock-to-flow model. Credit: Andreas Berheide/imageBROKER/Shutterstock
  • Bitcoin’s $1 trillion total value will increase a further $500 billion “eventually,” Fidelity’s macro expert says.
  • Bitcoin is often likened to gold because of its similar properties of scarcity and store of value.
  • The projection aligns with other forecasts comparing Bitcoin’s potential with gold.

Bitcoin will seize nearly a quarter of the current gold market owned by banks and private investors, according to Jurrien Timmer, director of global macro at Fidelity.

Timmer calculated the total value of gold — excluding jewellery or industrial use — and of Bitcoin for his estimates.

He said the world’s largest cryptocurrency could reach a valuation of $1.5 trillion, according to a post on X Thursday.

That’s $500 billion more than the current value of all Bitcoin in circulation.

Bitcoin has often been likened to gold, with many referring to it as digital gold. This comparison stems from similarities between the two assets, including scarcity, durability, and the perception of both as a store of value.

“Bitcoin will eventually capture around a quarter of the monetary gold market,” Timmer said. “I am guessing that the share of monetary gold is around 40% of total above-ground gold. At 40%, monetary gold is currently worth around $6 trillion.”

“Monetary gold” refers to the precious metal held by central banks, financial institutions, and governments as part of their foreign exchange reserves.

This type of gold is used to back the value of a country’s currency and can be in the form of physical bars or coins.

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On February 14, Bitcoin surpassed the $1 trillion mark for the first time in more than two years, igniting speculation from analysts on the asset’s trajectory over the next 18 months.

Skybridge Capital founder Anthony Scaramucci earlier this year said that he believed the total value of Bitcoin could reach half that of gold.

Scaramucci’s Bitcoin target would mean the total value of the cryptocurrency in circulation would reach about $6.5 trillion, which includes the value of all gold, not just banks’ holdings.

Others have made similar projections in comparing gold to Bitcoin.

What’s ‘stock-to-flow’?

The Fidelity executive based his analysis on a variation of the so-called stock-to-flow model, typically used in the commodities market, to illustrate the scarcity and value proposition of Bitcoin compared with gold.

The model gauges the current stock of a commodity against the flow of new production.

For Bitcoin, that’s the current available coins versus the flow of new coins produced from mining activity, up to a cap of 21 million coins.

It’s worth noting that while the stock-to-flow model attempts to predict Bitcoin’s value, it has faced criticism for not fully accounting for changes to the asset’s market dynamics.

Critics point out that Bitcoin’s price is influenced by factors beyond just scarcity, such as investor sentiment and regulatory changes, making the model’s predictions less reliable.

Timmer also notes that although Bitcoin’s growth has aligned with the stock-to-flow model so far, it may not apply once it hits its 21 million cap and new coin production ceases.

Current estimates suggest the last halving will occur in 116 years, or the year 2140, when all available Bitcoin is expected to be mined.

Correlation

To be sure, Bitcoin and gold rarely trade in tandem.

Bitcoin more closely tracks riskier assets like the tech-heavy Nasdaq, while gold’s rises tend to align with signs of skittishness in markets.

Gold is down about 2% this year, while Bitcoin and the Nasdaq have risen 16% and 8.6%, respectively.

Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.