LONDON: Bitcoin will take market share away from gold in 2022 as digital assets become more widely adopted, Goldman Sachs analyst Zach Pandl said in a research note to clients.
Citing bitcoin's $700 billion market capitalization, compared to the around $2.6 trillion worth of gold owned as an investment, Goldman Sachs said that the cryptocurrency currently has a 20% share of the "store of value" market.
Bitcoin will "most likely" become a bigger proportion over time, Goldman Sachs said, in a list of 2022 predictions.
In a hypothetical scenario in which bitcoin grabs a 50% share of this market, its price would reach just over $100,000, the note said.
Bitcoin was trading around $46,073 on Wednesday, having struggled to make gains after falling sharply in early December. In November, it had hit an all-time high of $69,000.
"Bitcoin may have applications beyond simply a "store of value" - and digital asset markets are much bigger than Bitcoin - but we think that comparing its market capitalization to gold can help put parameters on plausible outcomes for Bitcoin returns," Pandl wrote.
The term "store of value" usually describes assets which can maintain their worth over time without depreciating, such as precious metals or some currencies. Goldman Sachs restarted its cryptocurrency trading desk in 2021.
The trading desk reboot comes amid growing interest by institutions in bitcoin, which has soared more than 470% over the past year. The largest cryptocurrency is seen by investors and some companies as a hedge against inflation as governments and central banks turn on the stimulus taps.
Goldman first set up a cryptocurrency desk in 2018, just as bitcoin's price was falling from record highs, muting investor interest in digital coins.
Since then, market infrastructure for bitcoin and other large cryptocurrencies has significantly matured, with many established financial institutions offering products and services, including CME Group Inc, Intercontinental Exchange Inc , and Fidelity.
The developments have helped to attract more mainstream companies to the sector, ranging from those offering crypto services to retail or institutional investors, to companies opting to hold bitcoin on their balance sheets.
The price of bitcoin hit record highs in 2021 thanks to support from traditional finance, but cryptocurrency specialists are struggling to predict next year´s outcome for the volatile sector.
Having more than trebled in value to $60,000 between December 2020 and April, bitcoin has lost some shine to trade at under $50,000 heading into the new year.
Bitcoin´s rise in 2021 coincided with Wall Street´s growing appetite for cryptocurrency. The record high in April occurred with the stock market debut of cryptocurrency exchange Coinbase. October´s peak above $66,000 followed the launch of a bitcoin futures exchange-traded fund (ETF), or type of financial instrument, on the New York Stock Exchange.
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