Goldman Sachs: $100K Bitcoin possible over five years in ‘digital gold’ scenario

The news: Bitcoin’s price could pass the $100,000 milestone in the next five years, according to a research note by Goldman Sachs analyst Zach Pandl.

How did we get here? Goldman Sachs believes Bitcoin will steal market share from gold in the “store of value” market, driving its price just above $100,000.

  • A “store of value” conventionally refers to an asset or commodity that doesn’t depreciate in value and can be treated as a safe haven for capital by risk-averse investors.
  • Goldman estimates Bitcoin holds 20% of the gold-Bitcoin store of value market: Bitcoin’s market cap is $700 billion, compared with the total worth of gold as an investment at $2.6 trillion.
  • The Wall Street giant predicts that greater crypto adoption could drive Bitcoin’s store of value market share up 50% over the next five years.

Is Bitcoin really a store of value? Given Bitcoin’s inherent volatility, it might seem a stretch to assume that investors will treat it as a safe haven for their cash.

  • Bitcoin has long been referred to by some as “digital gold,” as it shares certain characteristics with the precious metal, like the fact that it also has a perceived value that isn’t derived from the performance of any specific entity.
  • Yet the constant price volatility—it hit a record of almost $69,000 in November but was trading below $45,000 as of writing—might mean investors still trust gold as a better store of value.

The big takeaway: Regardless of whether investors treat Bitcoin as a store of value, the allure of sky-high returns and adoption by FIs should drive sustained price growth.

  • Bitcoin was the top-performing asset class in 2021 with a return of 60%, just in front of crude oil (55%) and well ahead of the S&P 500 (29%).
  • As such, the potential for staggering returns will continue to capture the attention of retail investors.
  • And financial institutions like Goldman Sachs are getting in on the act by trading futures, and custody could soon follow.
  • The combination of these factors will push Bitcoin further into the mainstream and see its price tick up.