Bitcoin will continue to take market share from gold as part of broader adoption of digital assets, making the often touted price prediction of a $100,000 (Dh367,296) by advocates a possibility, according to top lender Goldman Sachs Group.
Goldman estimates that Bitcoin's float-adjusted market capitalisation is just under $700 billion. That accounts for 20 per cent share of the "store of value" market which it said is comprised of Bitcoin and gold. The value of gold that's available for investment is estimated at $2.6 trillion.
If Bitcoin's share of the store of value market were "hypothetically" to rise to 50 per cent over the next five years, its price would increase to just over $100,000, for a compound annualised return of 17 per cent or 18 per cent, Zach Pandl, co-head of global FX and EM strategy, wrote in a note Tuesday.
Bitcoin traded around $46,000 on Tuesday, after climbing about 60 per cent last year. The largest digital asset by market value hit a record of almost $69,000 in November. It has surged more than 4,700 per cent since 2016.
Although the Bitcoin network's consumption of real resources may be an obstacle to institutional adoption, that won't stop the demand for the asset, the note said.
Bitcoin has long been referred to as digital gold. And the criticisms levied at gold tend to apply to Bitcoin as well: It pays no interest or dividends, and it doesn't imitate the performance of more traditional assets. Advocates say Bitcoin, like gold, serves as protection against the systemic abuse of fiat currencies.