What Would Bitcoin Be Worth if It Replaced Gold as a Store of Value?

The Bitcoin market capitalization currently stands at approximately $0.39 trillion, while the gold market capitalization is around $12.3 trillion. This means Bitcoin would need to grow significantly to match the market value of gold. If we delve deeper, we can explore the potential worth of Bitcoin if it were to one day replace gold as a store of value.

The Value of Tangibility

Gold is tangible; you can hold it in your hand. Fake gold, however, can be decidedly problematic. Conversely, Bitcoin is a digital asset existing only as a set of cryptographic and numerical values in a vast, decentralized blockchain. Some liken Bitcoin to “monopoly money”, as it has no inherent value beyond the trust it is given, and its acceptance as currency is largely dependent on societal consensus and technological reliability.

Bitcoin: Monopoly Money

Rowden (2018) argues that Bitcoin is merely a set of digital numbers in a computer, not actual money. To be considered money, an asset typically needs to function as a medium of exchange, a unit of account, and a store of value. Bitcoin struggles to meet these standards comprehensively, given its volatility and reliance on complex technological infrastructure.

Bitcoin's Limitations

Compared to tangible assets or even tangible symbols like pieces of dogshit, Bitcoin often fails to hold any real value. As Comstock (2021) noted, if the technology that supports Bitcoin were to fail, rendering all the semiconductors and hardware useless, the entire system would collapse. The infrastructure that underlies Bitcoin is utterly vulnerable, as it relies on complex and sensitive electronic devices that are prone to failure.

Market Capitalization as a Benchmark

Currently, the market capitalization of gold is approximately $11.26 trillion, while Bitcoin’s market cap is about $0.456 billion. If we were to assume that Bitcoin grows to the same market cap as gold, then we can explore the potential value of Bitcoin. To achieve this parity, the price per Bitcoin would need to be calculated based on the gold market cap divided by the circulating supply of Bitcoin.

The formula would be: [ text{Price per Bitcoin} frac{text{Gold Market Cap}}{text{Circulating Supply of Bitcoin}} ] So, by dividing $11.26 trillion by 21 million Bitcoin, we get a price of approximately $536,190.47 per Bitcoin.

Practical Uses of Gold vs. Bitcoin

While gold has numerous practical uses, from luxury goods such as jewelry and watches to industrial applications such as plating and electroplating, Bitcoin’s utility is severely limited. For example:

Watch: Cannot use Bitcoin to create a watch with a digital asset. Tangible assets like gold are essential for such applications due to their physical properties. Ring: Similarly, Bitcoin cannot be used to create jewelry, as it lacks the necessary durability and aesthetic qualities of precious metals. Electrical contacts: Plating anything with a digital token, like if it were used for Bitcoin, would not provide the necessary protection against corrosion. Traditional precious metals are used for this purpose due to their inherent properties.

In conclusion, while Bitcoin has the potential to be worth much more than it is today, it faces significant challenges in replacing gold. The tangible advantages of gold in terms of durability, practical applications, and the historical trust built around it make it a more stable and reliable store of value.