Bitcoin’s daily volume coupled with the amount held by the large addresses matches around 10% of gold’s. After exploding by over 100% in 2021, Bitcoin (BTC) appears to be struggling to flip the $60,000 price level into support. Many now wonder, what is special about the magic round number and its accompanying $1 trillion market cap?
Gold’s $11 trillion market cap might have an answer to bitcoin trading within a range. BTC’s current trading volume and the amount that is held by institutions appear to reach around 10% of the precious yellow metal’s numbers.
The technical indicators and derivatives data offer some interesting near-term insights. However, to analyze cryptos in a wider context, one needs to focus on market cap, precious metals, and global wealth.
More Bitcoins Than In 2017
Please note that the 18.67 million current bitcoin circulating supply is 11.2% more than what existed in December 2017. Hence, using the unitary prices for long-term comparisons can be quite misleading.
The $1.1 trillion valuation translates into a 250% surge from December 2017 peak market cap at $327 billion. So because of the extra issuing, that number appears to differ from the 200% increase of the $20,000 nominal tag compared to the current $60,000.
The Surge Of ‘Digital Gold’
Another essential metric, gold, the precious yellow metal, has always been a proxy for the flagship crypto. Bitcoin has multiple use cases. But, the store of value has always been its main feature while the debate behind its commodity-like characteristics and currency persists.
Nevertheless, as the US expanded its monetary base over the last 12 months by about 53% to a staggering $5.25 trillion, the total number of institutional investors who are seeking bitcoin as a haven asset for inflation exploded.
Legendary investors Paul Tudor Jones and Ray Dalio both compared BTC’s unique features with gold, triggering more firms, insurers, and fund managers’ attention. Thus, the comparison with gold’s market cap became even more important.
Based on market data, bitcoin’s current $1 trillion market cap translates to around 10% of gold’s $11 trillion valuation. To determine how these markets compare, one needs to compare their volume traded, ETN and ETF markets, and institutional holdings.
In the meantime, there is $183 billion daily liquidity for gold, which includes registered over-the-counter (OTC) transactions, and regulated futures markets, and gold exchange-traded products.
Simultaneously, the daily volume for bitcoin is nearly $15.9 billion. Exchange-traded products like Grayscale Bitcoin Fund (GBTC) add another $1.5 billion daily liquidity, according to CryptoCompare. Thus, Bitcoin’s $17.4 billion average daily volume can be compared by nearly 9.5% of gold.
Bitcoin Exchange-Traded Products Vs. Gold ETF
BTC’s multiple exchange-traded products like Grayscale $GBTC and exchange-traded notes have been growing significantly. There are $58.7 billion assets under management (AUM), locked in crypto exchange-traded products, based on CryptoCompare’s March 2021 report.
The gold-backed ETF products amount to $198.8 billion. Thus, bitcoin’s $58.7 billion AUM represents about 29.5% of this amount. Nonetheless, a fair comparison should include physical holdings, which are the preferred instrument of banks and governments.
In the meantime, regulation for a majority of the fund managers needs bitcoin holdings to use the exchange-listed products, causing the disparity. For example, central banks and the International Monetary Fund (IMF) hold around 35,197 tonnes of gold, translating to $1.96 trillion.
Gold.org estimates that about 44,384 tonnes are held by private investment, which includes ETF markets that are worth another $2.47 trillion. All of that adds up to around $4.41 trillion in gold that is owned by institutional investors.
In the case of bitcoin, addresses holding 100 to 10,000 BTC own around 48.9% of the supply, which is equivalent to $538 billion held by big investors. Taking into context institutions’ gold holdings amount to about $4.41 trillion, bitcoin displays a 12.2% equivalent indicator. Hence, the scenario supports its current $1 trillion market cap.
One crypto asset analyst at Ark Invest, Yassine Elmandjra, thinks that BTC has the potential to exceed gold’s $10-trillion market cap. Mike McGlone, Bloomberg senior commodity strategist, puts it this way:
“Bitcoin fills the digital reserve-asset need in a low-yield world.”
McGlone went on to say:
“Adoption of the benchmark crypto as a global reserve asset has crossed the mainstream threshold, which could propel BTC price to as high as $400K in 2021.”
To sum it all up, BTC’s average volume traded and big investors’ holdings just about match 10% of gold’s markets. However, the $1 trillion market cap level might be a watershed moment for the next phase of BTC adoption. Bitcoin might remain pinned below $60K for some time, mainly as some analysts think that the price may only experience a major surge towards the end of 2021.