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
Japanese wealth manager Nomura to explore crypto and NFTs with new unit
In a move that may suggest growing institutional interest in cryptocurrencies and NFTs, Nomura Holdings has announced it is establishing a new digital assets...
BitMEX founders plead guilty to Bank Secrecy Act violations
The founders of crypto exchange BitMEX have pled guilty to violating the Bank Secrecy Act after a lengthy litigation process with the U.S. Department of...
NFTs most popular assets on Ethereum, but Wrapped Bitcoin growth stalls
Transfers of nonfungible tokens (NFT) on Ethereum have surpassed transfers of stablecoins and altcoins while the supply of wrapped Bitcoin (WBTC) has remained...
Ransomware crypto payments hit at least $602M last year: Chainalysis
A new report estimates that ransomware payments tallied at least $602 million in 2021 — but the actual total could be much higher.Blockchain analysis firm...
Maven 11 Capital raise $120M in secondary funding round
Digital asset investment firm Maven 11 Capital has announced a $120 million funding round for its private investment establishment, Venture Fund II, in...
Bitcoin fails ‘worst-case scenario’ monthly close for the first time, starts December sub-$57K
Bitcoin (BTC) has failed to hit the November closing price demanded by one of its best-known models — but its creator is not giving up.In a Twitter post...
One million ETH worth have been burned since the implementation of EIP-1559 in August
In a Twitter post published Wednesday, blockchain research firm CryptoRank revealed that over 1 million Ether (ETH) (worth $4.24 billion) had been burned...
Indian crypto exchanges prepare ad blitz for festive season
To celebrate the holiday season in India, cryptocurrency exchanges are looking to lure retail traders by launching aggressive marketing campaigns and giving...
PayPal reportedly assembling crypto team in Ireland as Bitcoin adoption grows
Global payments provider PayPal is in the process of recruiting for several cryptocurrency-related positions at its Ireland offices, further highlighting...
JPMorgan will reportedly give retail wealth clients access to crypto funds
Major U.S. investment bank JPMorgan Chase is reportedly allowing advisers to execute crypto trades for more of its clients.According to a Thursday report...
Bitcoin price is 3–4 weeks away from new $24K–$29K range, market analyst warns
Popular cryptocurrency trader Keith Wareing warned Bitcoin (BTC) traders about a critical bearish scenario brewing in the market.The trader spotted Bitcoin...
Korean banks will need to classify crypto exchange clients as ‘high risk’
New rules announced by South Korea’s Financial Services Commission, or FSC, are expected to affect around 60 unauthorized cryptocurrency exchanges in the...
Ghana gearing for central bank digital currency pilot
The Bank of Ghana (BoG) is reportedly moving towards the introduction of a central bank digital currency (CBDC) experiment.Speaking during a news conference...
EOS Jumps 20% In Bullish Trade
Investing.com - EOS was trading at $5.2708 by 12:17 (16:17 GMT) on the Investing.com Index on Thursday, up 20.17% on the day. It was the largest one-day...
Japan’s Internet Giant DMM Launches Bitcoin Exchange With 7 Cryptos
What could Japanese crypto enthusiasts have dreamt of? Probably, about the emergence of new beneficial exchange platforms, that would allow them to take...