Despite the slumping economy and fast-changing financial markets caused by the COVID-19 pandemic, Bitcoin is up over 35% since the start of 2020 and is earning a strong reputation to be our new "digital gold".
Industry estimates suggest that around 197,576 tonnes of gold has been mined throughout history, with over two-thirds mined since 1950. At a price per ounce of $1,914 this puts the total market cap of gold at over $12 trillion. However, real estimates of above-ground gold in circulation is closer to $9.7 trillion. According to Elon Musk and others, we also have over $700 quintillion of gold in a number of asteroids if we could figure out how to mine them.
Institutional and retail investors are flocking to the flagship cryptocurrency at unprecedented levels, attracted to its fixed supply and deflationary attributes. Less than 21 million bitcoins will ever be created and just over 18.7 million are already in circulation. With 7.8 billion people and only 46 million millionaires, there's not even enough bitcoin to go around for every millionaire to own one. Retail investors seem eager to throw their stimulus checks to Bitcoin, and institutional funds like MicroStrategy are also buying Bitcoin at record pace ($425 million, to be exact). At the time of writing this draft, Bitcoin's market cap was close to $195 billion, about 50 times smaller than the market cap of gold.
The graphic below shows the rapidly increasing assets under management (AUM) for the Grayscale Bitcoin Trust (GBTC), along with similar upward trajectories in futures open interest and the price of gold. On a 52-week basis, Bitcoin is the most correlated to gold since 2010. Futures contracts were a key initial onramp for Bitcoin into the mainstream of asset classes when first launched in 2017. At the time, Bitcoin's price was trading on par with gold, but today the Bitcoin-to-gold price ratio is above 0.44, showing the premium for Bitcoin is steadily increasing despite such a volatile economic climate.
The U.S. exchange-traded funds (ETFs) for Bitcoin and other defi products are only a matter of time, allowing easier access by money managers as gold ETFs did in 2004. The way we see it, something significant needs to go wrong to reverse Bitcoin's mass adoption and price appreciation. Otherwise, we have already found our digital gold.