Goldman Sachs sees Bitcoin at $100k, winning over gold

TL;DR Breakdown

Bitcoin adoption as digital gold will make Bitcoin reach a price tag of $100,000, according to analysts at the leading global investment bank, Goldman Sachs. The analyst noted that if Bitcoin continues to eat into the market share of gold as a “store of value” (SOV) asset, it could rise to the price tag within the next five years.

Goldman Sachs’ Zach Pandi predicts 18% ROI for Bitcoin

As reported by Bloomberg, Goldman Sachs’ analysts estimate that at present, Bitcoin accounts for around 20% of the “store of value” market with a “float-adjusted” market cap of $700 billion. Meanwhile, gold accounts for the remaining 80%, with about $2.6 trillion worth of gold available for investment.

However, if Bitcoin’s share of the SOV market were to rise by 50% over the next five years, the price of Bitcoin would be in the range of $100,000. By this estimate, the compound annualized return for Bitcoin would be 17 or 18%, according to Zach Pandl, Goldman Sachs’ co-head of global foreign exchange, interest rates, and emerging markets strategy research.

The research report adds that while the high energy consumption of the Bitcoin network could be a challenge to Bitcoin adoption, it would not stop the demand for Bitcoin as digital gold.

Bitcoin has been outperforming gold in the last few years

Throughout the 13 years lifespan of Bitcoin, it has been solidifying the digital gold narrative with its performance. According to data highlighted by Charlie Bilello, founder, and CEO of Compound Capital Advisors, Bitcoin has been on a three-year run as the best performing asset class by total returns. Even more impressive, Bitcoin has dominated the market for nine out of 11 years.

Bitcoin closed 2021 with 66.5% gains in return, while gold recorded a negative return of 4.1%. Total return on Bitcoin has also increased at an annualized rate of 197.2%, while gold has grown at 1.9%.

What does the future hold for Bitcoin?

Based on recent performance, many market analysts expect Bitcoin to pull more impressive figures in 2022. In contrast to Goodman Sachs’ analysis which expects a $100,000 price tag within five years, many analysts expect Bitcoin to reach the amount within 2022.

Some Bitcoin proponents, including President Nayib Bukele of El Salvador, and founder Antoni Trenchev of the crypto-lending platform Nexo, have cited institutional and nation-state adoption of Bitcoin as some of the major factors they expect to drive Bitcoin to the ambitious price tag. Another critical catalyst pinpoints growing inflation as one of the major reasons investors seek out SOV assets like Bitcoin and gold. 

However, the price of Bitcoin still has some distance to cover if it reaches $100,000 this year. Bitcoin is currently trading at around $46,200, down 0.92% on the day. The current price is about 32.7% down from its all-time high price of approximately $69,000 reached in November last year. To earn $100,000, Bitcoin has to surge over 70% from current price levels.