Why's Bitcoin stuck under $60,000? The gold market cap may hold the answer

Why's Bitcoin stuck under $60,000? The gold market cap may hold the answer

After rallying more than 100% in 2021, Bitcoin (BTC) seems to be struggling to turn the $60,000 level into support. After all, what is so special about this magic round number and its accompanying $1 trillion market capitalization?

Gold's $11 trillion market cap might hold the answer, as Bitcoin's current trading volume and the amount held by institutional investors seem to match 10% of the precious metal's numbers.

Our top trading bots

Technical indicators and derivatives data provide interesting short-term insights. But to analyze cryptocurrencies in a broader context, one should focus on market capitalization, precious metals and global wealth.

More Bitcoins than in 2017

Keep in mind that the 18.67 million current BTC circulating supply is 11.2% more than existed in December 2017. Therefore, using unitary prices for longer-term comparisons can be misleading.

Why's Bitcoin stuck under $60,000? The gold market cap may hold the answer
Bitcoin market capitalization, USD billion. Source: TradingView

The $1.1 trillion valuation translates into a 250% increase from December 2017 peak market capitalization at $327 billion. So because of the additional issuing, that number differs from the 200% increase of the $20,000 nominal tag versus the current $60,000.

The rise of "digital gold"

Another essential metric, gold, the precious metal, has always been a proxy for the leading cryptocurrency. Although Bitcoin has multiple use cases, store of value has always been its flagship feature while the debate behind its commodity-like features and currency persists.

Regardless, as the United States expanded its monetary base over the past twelve months by 53% to an astonishing $5.25 trillion, the number of institutional investors seeking Bitcoin as a safe haven for inflation skyrocketed.

Legendary investors Ray Dalio and Paul Tudor Jones both compared Bitcoin's unique features with gold, triggering even more companies, insurers, and fund managers' attention.

Therefore, the comparison with gold's market capitalization became even more relevant.

Why's Bitcoin stuck under $60,000? The gold market cap may hold the answer
Most valuable global assets. Source: 8marketcap.com

According to the above data, BTC's current $1 trillion market capitalization translates to roughly 10% of gold's, worth $11 trillion. To assess how those markets compare, one should compare their volume traded, ETF and ETN markets, in addition to institutional holdings.

Why's Bitcoin stuck under $60,000? The gold market cap may hold the answer
Average daily trading volumes, USD billion. Source: gold.org

Meanwhile, there's $183 billion daily liquidity for gold, including registered over-the-counter (OTC) transactions, in addition to regulated futures markets and gold exchange-traded products.

Why's Bitcoin stuck under $60,000? The gold market cap may hold the answer
Accumulated year-to-date transparent volume on April 2, USD. Source: Nomics

At the same time, the daily volume for BTC is approximately $15.9 billion. Exchange-traded products such as Grayscale Bitcoin Fund (GBTC) add another $1.5 billion daily liquidity, according to CryptoCompare. Therefore, Bitcoin's $17.4 billion average daily volume can be compared to roughly 9.5% of gold.

Gold ETF vs. Bitcoin exchange-traded products

Bitcoin's multiple exchange-traded products such as Grayscale $GBTC and exchange-traded notes have been growing considerably. There are $58.7 billion assets under management, or AUM, locked in crypto exchange-traded products, according to CryptoCompare's March 2021 report.

Why's Bitcoin stuck under $60,000? The gold market cap may hold the answer
Gold held by ETF products. Source: gold.org

So with gold-backed ETF products amounting to $198.8 billion, Bitcoin's $58.7 billion AUM represents 29.5% of this amount.

Nevertheless, a fair comparison needs to include physical holdings, the preferred instrument of governments and banks. Meanwhile, regulation for most fund managers requires BTC holdings to use exchange-listed products, causing the disparity.

For instance, central banks and the IMF hold 35,197 tonnes of gold, which translates to $1.96 trillion. Gold.org estimates 44,384 tonnes are held by private investment, including ETF markets, and those are worth another $2.47 trillion. All of this adds up to $4.41 trillion in gold held by institutional investors.

Why's Bitcoin stuck under $60,000? The gold market cap may hold the answer
Bitcoin addresses holding 100 to 10,000 BTC. Source: Santiment

With Bitcoin, addresses holding 100 to 10,000 BTC own 48.9% of the supply, equivalent to $538 billion held by large investors.

Considering institutions' gold holdings amount to $4.41 trillion, BTC displays a 12.2% equivalent indicator, thus supporting its current $1 trillion market capitalization.

Yassine Elmandjra, a crypto asset analyst at Ark Invest, believes Bitcoin has the potential to surpass gold's $10-trillion market cap. As Bloomberg senior commodity strategist, Mike McGlone puts it:

"Bitcoin fills the digital reserve-asset need in a low-yield world."

McGlone goes further, however, adding that "adoption of the benchmark crypto as a global reserve asset has crossed the mainstream threshold," which could propel BTC price to as high as $400,000 in 2021. 

So to sum up, Bitcoin's average volume traded and large investors' holdings roughly match 10% of gold's markets. But while the $1 trillion market cap level may be a watershed moment for the next phase of Bitcoin adoption, BTC may remain pinned below $60,000 for quite some time, particularly as some analysts believe the price may only see a major surge toward the end of the year. 

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Continue reading with Cointelegraph
Lawmakers explore Bitcoin mining efficiency, broader crypto policy issues during Congress hearing
On Jan. 20, the Oversight and Investigations subcommittee of the U.S. Congress House Energy and Commerce Committee convened a hearing to investigate the...
OpenSea surpasses $3.5B in monthly Ether trading volume setting new ATH
With two more weeks left in January, nonfungible token (NFT) marketplace OpenSea has seen its monthly trade volume in Ether (ETH) exceed $3.5 billion for...
Bitcoin miners can take fresh 20% BTC price hit before capitulating, data shows
The Bitcoin (BTC) mining business is bigger than ever at current price levels, and new data shows just how unlikely a mass miner sell-off really is.As...
Mintable app to support minting NFTs on the layer two Immutable X protocol
Mintable marketplace announced its partnership with Immutable X, a StarkWare-based layer-two solution for nonfungible tokens (NFTs) on Ethereum, to make...
Fidelity reportedly launching spot Bitcoin ETF in Canada
It's been a bumpy ride for Bitcoin (BTC) investors. While waiting on the United States Securities and Exchange Commission (SEC) to make their decision about...
Vulnerable: Kraken reveals many US Bitcoin ATMs still use default admin QR codes
Kraken Security Labs has said that a “large number” of Bitcoin ATMs are vulnerable to hacking as the administrators never changed the default admin QR code....
NFT marketplace Metaplex hires former Google dev as CEO, appoints advisory board
Nonfungible token (NFT) marketplace Metaplex has hired a new CEO and appointed an advisory board comprising some of crypto’s most influential voices, setting...
Coinbase Ventures, Samsung NEXT back Metrika’s $14M Series A
Blockchain intelligence platform Metrika has concluded a $14 million Series A fundraiser to bootstrap the next phase of its growth strategy, further underscoring...
Presearch, Aragon and IOTA explode higher after Bitcoin price clips $50K
Optimism across the crypto market continues to rise as bullish developments in the price of Bitcoin and Ethereum (ETH) renewed discussions about a 2013-style...
GoldenTree Asset Management is reportedly investing in Bitcoin
New York-based asset management firm GoldenTree has reportedly added Bitcoin to its balance sheet, though the amount of this supposed investment remains...
Cryptocurrency’s latest use case: Music production?
A recent collaboration between social influencers Estefannie and Look Mum No Computer, the pseudonym of musician Sam Battle, has resulted in a device that...
Dutch official calls for complete ban on Bitcoin
While El Salvador adopts Bitcoin as legal tender, one Dutch official blasted the cryptocurrency, calling for an urgent blanket ban.Pieter Hasekamp, director...
Basketball star turned digital racehorse tycoon: Wilson Chandler on NFTs and the NBA
As Wilson Chandler tells it, despite being a NBA star with a decade-plus pro career and nearly $80 million in career earnings, the 6’8 combo forward still...
Korean gov’t clarifies crypto regulatory roles of different agencies
Over the past year or so, the crypto community in South Korea has had to adapt to a suite of new regulations and government frameworks tailored to the growing...
Altcoin to Invest: Zcash
Zcash is a cryptocurrency with open source, developed by Zerocoin Electric Coin Company on October 28, 2016. Zcash provides privacy and selective transparency...