Bitcoin Vs Gold Market Cap: Will Bitcoin Become the Gold 2.0?

Bitcoin, the world’s first cryptocurrency, has attracted tremendous attention in recent years. Often referred to as “digital gold,” it has attracted many investors who see it as a way to diversify their wealth and secure their financial future. But the question remains: will Bitcoin ever outperform Gold’s market cap? Can it be the Gold 2.0?

gold 2.0

Bitcoin Market Cap Vs Gold Market Cap

First, it is important to understand what market cap is. Market cap is calculated by multiplying the total number of coins or tokens in circulation by the current market price. If a cryptocurrency has 1 million coins in circulation and is traded at $1 per coin, its market cap would be $1 million.  Gold market capitalization is calculated by multiplying the total amount of gold in circulation by the current price of gold.

In 2021, Bitcoin’s market cap peaked at around $1 trillion, while gold’s market cap was around $11 trillion. Even when Bitcoin was at its best in history, it still had a long way to go to outperform gold. Bitcoin is currently trading at a market cap of $512  Billion as at this writing and Gold at  $13 Trillion.  Bitcoin needs to increase in price by a factor of 26  to be hot on the trail of gold. 

Bitcoin critics like Peter Schiff in particular have always argued against a further increase in the price of Bitcoin. It is often argued that Bitcoin is still a very young and untested concept compared to gold. It has yet to prove itself to be a stable and reliable investment option, and it remains unclear how it will fare in economic downturns or other challenges.

other challenges

However, not everyone shares Peter Schiff’s opinion. Even his son, @SchiffSpencer, invests in Bitcoin.

The Digital Gold 

There are many Bitcoin supporters who believe that the cryptocurrency will one day surpass gold’s market cap. They see it as an alternative investment option that deviates from traditional investment options and offers investors new opportunities. Bitcoin utility also trumps gold’s in some aspects.

Gold is certainly not suitable for everyday use; whether it be to clear a shopping cart on an online store or quick payment for a quick bite at Chick Fil a. Bitcoin isn’t really there yet either, but it clearly has potential. Many companies and online stores now accept Bitcoin as a valid means of payment and this will surely contribute to its worldwide acceptance as time goes. 

One factor that could contribute to Bitcoin’s growth is the increasing adoption of cryptocurrencies by governments, businesses, and consumers. In recent years, some governments have already taken steps to regulate and integrate cryptocurrencies, and these efforts are expected to increase further in the future.

According to Prof. Dr. Philipp Sandner: “Cryptocurrencies are a vehicle with excellent prospects for the future. They have the potential to overtake conventional financial products while providing more efficiency, less bureaucracy, and more transparency.” While this is not a general take and it is ‘just’ an opinion, investors have a real knack for taking risks and Bitcoin is considered by many as a risk worth taking. 

We are in the digital age, and the most common investment among Gen Zs is cryptocurrency. A study by the Bank of America says that about 47% of  wealthy young US investors invest in cryptocurrency.  This is significant. 

Bitcoin Vs Gold: The ‘Why’

Experts have opposing opinions on what the future holds for Bitcoin and whether or not it will outperform gold’s performance. Comparisons between Bitcoin and gold are common and have grown over the years.

But what do Bitcoin and gold have in common that put them in the same category?

Why is everyone suddenly drawing parallels between a physical precious metal and a digital currency?

The truth is that, although there are quite marked differences between the two, Bitcoin and gold have several similarities that justify the comparison. One of these is the fact that investors see both assets as a kind of “bearer asset,” that is, a financial instrument that is transferred through possession without the need for formal registration of ownership. Thus, if you hold it, you own it.  They are also both ‘sound money’ that maintains their value and purchasing power over time.  

Gold has long been considered a crisis-proof currency, but the market’s leading cryptocurrency earned the name Digital Gold in 2020.  It mirrored the trajectory of the precious metal and began to emerge as a potential store of wealth as the global economy faltered against the backdrop of the coronavirus pandemic. 

Bitcoin, like Gold, also has a limited supply, which prevents excessive asset creation and therefore prevents runaway inflation as we see with fiat currencies. This is in addition to not being controlled by any government or central authority.

And, let’s face it, the consensus that Bitcoins fulfill the functions of money as a “unit of value” and “means of exchange” is more than justified, with only the function of “store of value” remaining controversial. There are those who argue that gold has intrinsic value and real utility, unlike Bitcoin. However, only 7.5% of circulating gold is used for industrial purposes. The remainder is used for jewelry making, purchases for investment, and bank reserve purposes, which strongly weakens the “utility” argument. 

In summary, gold is mostly priced and valued based on its speculative nature as a stable reserve of value against inflation. In this sense, it is practically indistinguishable from Bitcoin which has as its intrinsic utility embedded in its function as a peer-to-peer and decentralized transaction network.

Bitcoin or Gold: Which Should Invest In? 

Although both have been placed in the same category of “protection assets against inflation,” mainly with the collapse of the US banking system driving the search for assets with strong monetary appeal and “footprint” of the store of value, they are quite far apart from a practical investment point of view.

The first notable difference is that gold is seen as a more conservative investment and/or as a “risk-free” asset, while Bitcoin still exhibits sharp fluctuation in price and extreme volatility – thus, a lot of attributed risk.  Bitcoin plunged more than 60% of its value in late 2022 and is only now recovering. Critics say, “so much for store of wealth.” 

However, we must take into account that Bitcoin is still extremely new and we are still “early adopters.” There is no way to expect stability from an asset on the rise and at the beginning of its S-curve adoption phase. There is usually a process of speculation, usually accompanied by rejection, fear, and, finally, understanding and study until the masses start to feel confident to invest and accept a new idea.

So does Bitcoin have what it takes to become Gold 2.0?

Perhaps when answering this question one should not think in terms of finding a winner, but rather in terms of knowing both assets for the function they both serve.  

Bitcoin has barely lasted a decade while Gold has been here for ages. Therefore, issues such as ‘trust’ or ‘security’ are under scrutiny of course. However, while these are essential aspects for means of payment or financial investment, what the future holds for Bitcoin remains exciting.


Can Bitcoin Replace Gold? 

Not yet. Bitcoin still needs to prove itself as a sure-proof store of wealth against an asset that has existed for centuries. Bitcoin market cap will equal Gold’s when 1 BTC is approximately $500,000 – and experts don’t think this will happen soon.

Is There a Correlation Between BTC and Gold?

Yes. Bitcoin’s price chart somewhat correlates with Gold’s. Their correlation currently stands at 50% according to Yahoo. 

Is it Better to Invest In Gold or Bitcoin?

Bitcoin is more volatile than Gold and therefore gives significantly more returns on investment. However, increased volatility means increased risk. Digital assets like Bitcoin can appeal to potential investors. Overall, you should invest according to your risk tolerance and appetite.

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