Central banks aren’t buying it. Billionaire investor Ray Dalio doesn’t trust it as a safe haven. And Bitcoin is trading 44% below its October peak, while gold is near new highs.
Related reading
This is the background against which the chief investment officer of Bitwise Asset Management argues that Bitcoin could still reach $1 million per coin within a decade.
A different way to manipulate numbers
Most people who reject the $1 million prediction do so by pointing out that it would take Bitcoin to swallow half of the market value of gold.
Matt Hougan says that account is incorrect. According to Hougan, the mistake is to think of the market value of gold as a fixed number, not a moving number.
Gold has risen about 13% since 2004, from $2.5 trillion to about $38 trillion, driven by rising sovereign debt concerns, geopolitical tensions and loose monetary policy.
Hugan predicts that if gold’s trajectory holds, the broader value-added market will reach about $121 trillion in 10 years.
At this scale, Bitcoin only needs to occupy 17% of the total – about one-sixth – to be worth $1 million per coin. This is a significantly different question than the 50% figure critics typically cite.
Hougan also pointed to institutional investment as a driver. Exchange-traded funds, sovereign wealth funds, and increased portfolio diversification are all cited as forces that could push Bitcoin’s market share higher over the next decade.
“There’s still miles to go, but capturing a sixth of the value store market in 10 years doesn’t seem extreme,” he wrote in a blog post.
Differences between abstracts and diagrams
The argument rests on Bitcoin becoming more like gold over time. Now, it’s not. Gold hit a record high of $5,327 an ounce at the end of January and remains within 2.2% of that level.
Bitcoin, on the other hand, is slippery. It has fallen sharply from its highs, even as the macroeconomic conditions — debt concerns, inflation uncertainty, geopolitical tensions — that typically lift gold remain in play.
A survey from NYDIG addressed this gap directly in early March. According to the firm’s global head of research, Bitcoin does not appear to be priced as a macro hedge, independent risk hedge or inflation trade.
The NYDIG said the split explains the frustration over Bitcoin’s failure to track gold despite the “digital gold” tag it’s followed for years.
Return of Dalio
Dalio added his voice to the skeptics earlier this month, arguing that gold remains a much stronger long-term stock of value.
His argument: central banks buy gold, not Bitcoin. And bitcoin, he said, trades less like a stock and more like a technology stock — something that follows risk appetite, not resists it.
Related reading
Bitcoin and the Iran-US War
Bitcoin’s recent price action tells the story clearly. A U.S.-Israeli military attack on Iran in late February triggered more than $300 million in crypto liquidation and sent bitcoin down before a partial recovery following signals that the conflict may end.
It moved with risk appetite, not against it—which is exactly what Dalio and others point to, as they argue that Bitcoin has a long way to go before it becomes comparable to gold.
Featured image from Unsplash, chart from TradingView
