Bitcoin market capitalization has grown over gold
With the recent increase in the price of Bitcoin, its market capitalization is almost 7% of the gold capitalization. Network analysts and cryptocurrency influencers on Twitter have been asking for “Gold Flippening” and this could be the first step in that direction.
In October 2020, when the momentum of the Bitcoin network was steadily increasing, Bitcoin’s correlation with gold was high. There has been a 360-degree change in the situation and the correlation between Bitcoin and gold has been almost zero since decoupling. But most Crypto Twitter influencers continue to make the comparison with gold.
Fund managers labeled it as ancient gold. In its recently published note, JP Morgan commented on Bitcoin’s growth, saying it has the potential to compete with gold as an asset class.
In the current price recovery, market capitalization has been instrumental, as Bitcoin’s market capitalization has made it profitable for institutions like MicroStrategy and Square. So much so that the institutions raised funds to invest in Bitcoin at an average price of more than $ 19,000.
The narrative of this price hike was that of digital gold, and there is a clear possibility that increasing market capitalization will increase the investment flow from gold to Bitcoin. This supports the argument of Bitcoin and HODLers traders.
Despite the decoupling, the relationship between the two assets remained at the level of impact on the investment flow due to the change in narratives. The two assets have almost the same group of active investors and this may be another factor in comparing Bitcoin with gold.
Hedge fund managers are comparing the risk-adjusted returns of the two assets and there is a clear winner, however, sustained long-term growth and profitability without the negative side of volatility is the gold feat. Bitcoin’s growing market capitalization is attracting more retail merchants, increasing demand for institutions and increasing the momentum of the network.
Bitcoin network momentum || Source: Woobull Graphics
This network momentum and sustained volatility contributed to market capitalization and drove prices upwards – since supply is limited. With less than 2.5 million Bitcoins left to mine, Bitcoin’s market capitalization being over 7% compared to gold makes it a bullish signal for retail traders looking to enter the market and investors institutions that wish to record profits.