Could gold be the reason why Bitcoin is hitting $ 100k this cycle?

Bitcoin and gold share similarities but also differ significantly from one another. While bitcoin has been a millennial go-getter asset, organizations are also seeing bitcoin as a very promising asset.

Interestingly, the competition between bitcoin and gold fans is a long-standing one, and while people who support both investment companies like Grayscale have invested heavily in Bitcoin.

Regardless of the attendants’ loyalty, one thing is becoming increasingly clear, recent bitcoin investors are liquidating their gold holdings to invest in bitcoin.

Is it time to melt gold?

Although both are unconnected safe haven assets, bitcoin is clearly better than gold in many ways. Returns, portability, storage, etc., are just a few of many reasons why investors would prefer bitcoin compared to financial metals like gold.

In fact, bitcoin’s market cap is 3% larger than gold, and this seems to be only the first step. As mentioned in many AMBCrypto articles, there is a good chance for bitcoin to hit the $ 100,000 price point this cycle which makes bitcoin’s market cap 20% gold.

So how could this happen?

If we were to guess, there could be two ways.

  1. The initial wave of institutional investors will push the price to an intermediate level of, say $ 40,000. These investors will be similar to MicroStrategy, they will want to invest in bitcoin rather than gold for the above reasons. As seen in the last quarter, and in fact, the whole of 2020, investors, asset managers, hedge funds have all dipped their toes into the bitcoin pool. Moreover, the policy of central banks will be one of the key drivers for these investors to invest in bitcoin.
  2. So when this plays out and bitcoin hits $ 40,000, it will incentivize a massive FOMO that will bring out the next wave of investors. At this point, the investors who will want exposure to bitcoin could come from gold. Given a huge pot of gold, a small portion of these investors could also cause huge buying pressure that will catapult it the rest of the way.

Food for thought

BlackRock, the world’s largest asset manager, has AUM $ 8T and is also an investor in Microstrategy. In addition, MicroStrategy has clearly mentioned their $ 1 billion investment in bitcoin after receiving approval from the investors like BlackRock.

As a thought experiment, if and when MicroStrategy’s bitcoin bet pays off, BlackRock will definitely advise bitcoin to its investors, who will kick off the 3rd wave of investors.

All in all, investing in bitcoin is a disproportionate bet and while gold is a hardcore asset similar to bitcoin, time will eventually tell which asset will survive. For now, many seem to be moving in favor of Bitcoin.