Blockstream CEO Adam Back sees the market capitalization of bitcoin surpassing that of gold over the next two years.
1 BTC = $700,000
Adam Back is a lauded cryptographer and cypherpunk in the White paper by Satoshi Nakamoto. His invention, Hashcash, a method for countering denial of service attacks, served as the basis for Bitcoin’s Proof of Work system.
Today he is the head of Blockstream, a company at the forefront of technologies revolving around bitcoin. For him, BTC will surpass gold during this “halving”:
“Bitcoin, digital gold, will certainly overtake gold sooner or later; and probably during this halving. So in a year or two. Currently this would give us $700,000 per BTC. That said, perhaps it will partially substitute for gold in the process. (If some people sell their gold to buy bitcoin, its market cap could surpass that of gold before $700,000). »
Why $700,000? It is enough to make a cross product with the market capitalization of all the gold in the world ($13,000 billion), that of bitcoin ($840 billion), and the price of 1 BTC ($44,000).
The market capitalization of bitcoin must increase by 15 times to match that of gold. It would also result in a 15-fold increase in the value of a bitcoin, or around $700,000.
Adam Back also explains that “flippening” will happen before $700,000 if bitcoin sucks up some of the value contained in gold in the process.
Clearly, in the scenario where the rise of bitcoin would be exclusively fueled by a transfer of value from gold, the threshold would be around $350,000.
But why swap your gold for bitcoin?
Gold vs. Bitcoin
Gold is the historical store of value due to the fact that it is rare and stainless. Nothing like it is produced at a slower rate than gold.
That said, we remove more than 3,000 tonnes of soil per year. Furthermore, production continues to increase year after year.
Given that the global gold stock is around 180,000 tonnes, these 3,000 tonnes mined each year give us an S2F (Stock to Flow) ratio of 60. That is to say, it takes 60 years of production to double the existing stock.
Bitcoin has a slightly lower ratio, for the moment… Everything will be turned upside down from next April, the date of the “halving”. The amount of bitcoins created each year will drop from around 328,500 BTC to half that (164,2500 BTC).
Bitcoin’s S2F ratio will then explode to 120, officially becoming twice as difficult to create as gold. This ratio will exceed 1000 in 2035, when 99% of bitcoins will already be in circulation.
If the success of gold is above all linked to its scarcity, it can only capitulate to bitcoin. Especially since it is infinitely easier to move bitcoins, among other numerous advantages.
The barbarian relic will always remain highly prized for goldsmithing and industry (it is a very conductive metal). But it will no longer be the best store of value. And by far.
A bitcoin at $700,000 is inevitable, especially since it will not only take out gold dealers. Other assets such as real estate, debt, stock market shares, will also be abandoned in favor of absolute scarcity.
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