Under- $ 22K Bitcoin looks juicy compared to the market value of gold

Under- $ 22K Bitcoin looks juicy compared to the market value of gold – Mail Bonus


Bitcoin (BTC) prices have fallen by 56% so far this year, but the correction was not strong enough to remove the digital asset from the list of top 20 internationally traded assets. The current $ 400 billion market value of Bitcoin is higher than traditional companies like Exxon Mobil, Walmart and Procter & Gamble, but it is always a question of whether a direct comparison between a product like Bitcoin and stocks is valid.

The most valuable business in the world. Source: 8marketcap.com

Equity analysts and investors constantly remind cryptocurrencies that Exxon Mobil has returned $ 25.79 billion in revenue over the past 12 months, as a justified example of its valuation. But on the other hand, revenue does not necessarily explain how Boeing booked a $ 16.1 billion loss in two years, even with a market capitalization of $ 87.1 billion.

Measuring the market value of a commodity can be complicated. For example, in the case of silver, only 50% of the precious metal is used in industry. There are individuals and companies who hold the property for investment in the form of rods, coins or jewelery and these are not “high-performing” income-generating assets.

The value of Bitcoin is much lower than the $ 11.2 trillion market value of gold, but what does “$ 400 billion” even mean and how does it compare to broader asset classes such as the global stock, real estate and debt markets?

Was the Bitcoin “digital gold” thesis wrong?

The first question one should ask is: Has gold been a good value for the past five years? To find answers, traders must compare its prices with other trillion-dollar asset classes such as international equities, oil and real estate. The overall goal of any value-added store is to maintain purchasing power, regardless of price fluctuations during the period.

Gold vs. WTI Oil, S & P500 Index and Case-Shiller Home Price. Source: TradingView

From July 2017 to July 2022, gold has been 18% or higher under the remaining asset classes. The precious metal exceeded $ 2,000 in August 2020, but it could not keep up with rising stock prices, housing and energy. In comparison, the US monetary base, bank deposits and cash, expanded by 48.5% over the same period.

It could be argued that gold has not been able to sustain its purchasing power over time, but it is likely that more time will be needed to assess how the precious metal will behave if the current global crisis accelerates or lasts longer than expected. . At the same time, during this same period, Bitcoin gave 840% profit from July 2017 to July 2022.

Here is the solution to Bitcoin price fluctuations

It is a legitimate question of Bitcoin fluctuations and rightly so given the fact that the asset regularly faces 20% or higher weekly price increases. But there is a simple and quick solution to reduce this fluctuation, or at least reduce the impact in the long run. The dollar cost average (DCA) policy consists of regularly purchasing predetermined amounts of property daily, weekly or monthly.

Bitcoin price in USD against 5 year moving average. Source: TradingView

For example, following this policy over the past five years would have resulted in an average cost of $ 19,192. So even if the 8.3% profit at the current $ 20,800 price might not be enough to compete with gold, it certainly shows a more predictable form of using Bitcoin as a long-term value.

Gold ETF vs Bitcoin Investment Products

According to CryptoCompare, Bitcoin’s investment instruments under management (AUM) totaled $ 15.9 billion in June. This measure includes stock exchange products such as Grayscale GBTC and stock exchange notes from many providers. This ratio is equivalent to 4% of the current $ 400 million market value of Bitcoin.

Total cryptocurrencies, billion US dollars. Source: CryptoCompare

In comparison, gold-secured ETFs stood at $ 221.7 billion in June, according to information from GoldHub. Excluding 50% “non-financial use of gold” such as jewelery and industry, the remaining market value is stands at $ 5.6 trillion. As a result, the fund’s stock exchange investment equipment corresponds to 4% of the market value of the adjusted gold.

Connected: Bitcoin is now in its longest “extreme fear” period

At $ 20,800, Bitcoin Investment Instruments’ holdings correspond to the gold market. Although the market value of USD 400 million may concern some investors, the uptake of the asset is minimal compared to the uptake of gold, a precious metal with a history of 7,000 years as an investment instrument.

Based on the five-year period reported and using a simple DCA policy to eliminate large price fluctuations, gold is currently a better value, but it does not invalidate Bitcoin’s 8.3% profit during the period. In short, both properties have yet to prove themselves.

The views and opinions expressed herein are theirs alone author and do not necessarily reflect the views of Cointelegraph. Every investment and business involves risk. You should do your own research when making a decision.