Can We Value Bitcoin Against Gold?

In an era where the cryptocurrency market is rapidly growing, finding a method to assess the value of Bitcoin (BTC) becomes crucial. By comparing it to gold, a long-established asset, we can create a clear framework for valuation.

Total Supply of Bitcoin and Gold

   Bitcoin has a maximum supply of 21 million BTC, with approximately 19.5 million BTC mined as of now. Notably, Satoshi Nakamoto, the creator of Bitcoin, is believed to have reserved 1 million BTC for himself, which may never be released into circulation. This decision could create additional scarcity and enhance Bitcoin’s value over time, as the effective supply might be seen as only 20 million BTC available to the market.
   The total amount of gold ever mined is about 197,000 tons. A 400-ounce gold bar weighs approximately 11.34 kilograms, leading to an estimated 17.38 million bars of this size. Given the estimated total supply of gold, the scarcity of gold has historically contributed to its status as a store of value, similar to the principles behind Bitcoin’s limited supply.

Comparative Analysis

   By comparing the total supply of Bitcoin with that of gold, we observe a parallel that may serve as a foundation for Bitcoin’s valuation. With around 19.5 million BTC compared to 197,000 tons of gold, the market dynamics of both assets reflect their scarcity. If we assume the effective supply of Bitcoin is approximately 20 million BTC, the comparative analysis suggests a scarcity value similar to gold. This parallel supports the idea that Bitcoin, much like gold, could function as a hedge against inflation and economic instability.

   The current price of gold is approximately $2,659.01 per ounce. Therefore, the price of a 400-ounce gold bar is about: 
2,659.01 * 400 ounce = 1,063,604 USD
Proposing that 1 BTC is equivalent to the price of a 400-ounce gold bar means that 1 BTC would have a value of approximately $1,063,604. This relationship may lead to changes in the value of BTC as trading occurs in the market. Bitcoin prices are more volatile than gold. The stability of gold as an asset may influence investors’ decisions regarding Bitcoin.

Conclusion
   Comparing the total supply and assessing the value of Bitcoin through the lens of 400-ounce gold bars can help investors recognize the potential of BTC as a store of value in the long term. The decision by Satoshi to set aside 1 million BTC adds another layer of scarcity, potentially driving up its value as more investors look to acquire a limited asset. Ultimately, the alignment of Bitcoin’s limited supply with the scarcity of gold provides a compelling foundation for evaluating Bitcoin’s value in today’s market.