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Bitcoin and gold’s historical connection dates back to Bitcoin’s emergence as the pioneer crypto asset. Although not explicitly stated in the Bitcoin white paper, the token founder, Satoshi Nakamoto, made a subtle reference to gold scarcity in a Bitcointalk forum post during the launch of the initial version of Bitcoin (BTC) in 2009.

Nakamoto’s reference emphasized the importance of keeping a limited supply of 21 million transaction coins. Moreover, comparing Bitcoin’s market value to gold’s value, valued at $12.8 trillion, was standard as of then.

In addition, many crypto experts argue that the driving force behind BTC’s price surge was the endorsement of the first gold exchange-traded fund (ETF) in 2004. At its current price of $30,000, Bitcoin is facing a hurdle to break even, and its struggle to overcome this barrier may be attributed to how institutional investors interpret the valuations of BTC and gold as hedges against skyrocketing inflation.

Bitcoin’s market capitalization of $570 billion puts it ahead of established corporate firms like Visa, JPMorgan Chase, and Taiwan Semiconductor. Nonetheless, it is 55% less valuable than silver and significantly less valuable than gold, the world’s most tradeable asset.

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As a result, analysts are concerned about the connection between the prices of the two assets and how they impact the global market. Considering Bitcoin’s increased unpredictability, the reasoning behind this question becomes clear.

For example, the 30-day correlation measure can change from positive to negative in weeks. Therefore, the need for a consistent price correlation can be attributed to Bitcoin’s slow adoption and investors’ lingering uncertainty about its prospects and real-world use cases.

Meanwhile, the ongoing debates among investors and analysts center on whether Bitcoin’s decentralized nature and limited availability support its position as a financial backup. But the opposing voices argue that its price fluctuations limit its effectiveness as a means of transaction.

Nonetheless, observers believe comparing Bitcoin’s market capitalization to major international stocks and other commodities isn’t bad.

How Bitcoin Investment Products And Gold ETF Compare To One Another

According to CryptoCompare data, investment instruments linked to Bitcoin accumulated $24 billion in July. This includes entities like the Grayscale Bitcoin Trust and exchange-traded notes from different service providers.

This accounts for roughly 4.2% of Bitcoin’s current market capitalization of $570 billion. Experts forecast that even if institutional investors hold a higher estimate of 1.66 million BTC, this would still amount to only 8.5% of the total market cap of the asset.

In contrast, gold-linked ETF offerings were valued at $215 billion in June, accounting for only 1.7% of gold’s market cap. However, the analysis also considered physical gold reserves preferred by governments and traditional financial institutions to have a more balanced assessment.

Besides this, regulatory factors frequently direct fund managers toward BTC products listed on exchanges, contributing to this variation. Thus, these findings suggest that Bitcoin’s acceptance as a store of value by institutional investors is approximately 81% lower than gold.

This disparity helps to explain why Bitcoin’s current market cap of $570 billion is 95.5% less than that of gold.

Bitcoin Still Has Its Use

Even if Bitcoin is not fully adopted as an institutional asset store, experts believe its market capitalization could grow by up to 5x, reaching a significant $2.9 trillion in value. This increase could be attributed to a growing demand for decentralized digital trading.

As traditional financial systems face challenges, Bitcoin’s position as a global, censorship-resistant transaction platform becomes even more critical. Furthermore, transaction volumes will increase as Bitcoin becomes more integrated into the e-commerce and online market segments.

In addition, BTC’s limited supply and usability could set the stage for value-based transactions as people look for alternatives to traditional payment methods. According to experts, this combination of factors suggests that Bitcoin’s price rise may not be solely due to its institutional adoption as a store of value.

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George Ward

By George Ward

George Ward is a crypto journalist and market analyst at Herald Sheets, known for his engaging articles on the latest digital currency trends. With a background in finance and journalism, he presents complex topics accessibly. George holds a degree in Business and Finance from the University of Cambridge.