Global Macro Investor CEO Raoul Pal believes Bitcoin could outperform gold over the long term, arguing that while both stores of value benefit from inflation, Bitcoin has a significantly higher potential upside than the precious metal.
At the Jackson Hole Symposium on Thursday, Federal Reserve chair Jerome Powell announced the Fed’s plan to target an average inflation rate of 2%. As the BTC Times reported, rising inflation in the U.S. may catalyze Bitcoin as it will potentially lead to increased devaluation of the U.S. dollar.
Bitcoin has all of the characteristics of a safe-haven asset; it is censorship-resistant, portable, and scarce. Gold, too, is scarce due to its limited supply, but unlike Bitcoin’s monetary supply, the gold supply is not fixed.
The amount of circulating gold could potentially increase if a large supply of the precious metal is discovered. Although the probability of that happening is low, it exists nonetheless. Meanwhile, the fixed supply of Bitcoin at 21 million is practically unalterable given the Bitcoin network’s decentralized nature.
Based on the superior scarcity of Bitcoin and its other advantageous characteristics, the argument that Bitcoin could outperform gold remains strong. Atop Bitcoin’s fundamental strengths, the massive market capitalization gap between Bitcoin and gold is believed by many to give Bitcoin superior growth potential in the medium term.
As Tyler Winklevoss wrote in a recently published essay, the gold market capitalization is currently estimated at $9 trillion. Considering that Bitcoin’s market capitalization hovers at $212 billion as of August 29th, if Bitcoin catches up to gold - which avid Bitcoin proponents believe to be entirely possible - it would happen through a 42.5-fold upside. Pal said:
Powell has shown that there is ZERO tolerance for deflation so they will do ANYTHING to stop it, and that is good for the two hardest assets - Gold and Bitcoin. Powell WANTS inflation. I don't think he gets true demand push inflation but he will get fiat devaluation, in conjunction with the other central banks all on the same mission. Overall, I think Bitcoin outperforms gold. Gold can go up 2x or 3x or even 5x while bitcoin can go up 50x or even 100x.
Whether Bitcoin could reach a multi-trillion dollar market capitalization depends on its mainstream adoption and the growth of its infrastructure. The chances of Bitcoin evolving into a major safe-haven asset may increase if the current rate of institutional inflow is sustained or increases.
Throughout the past year, every several months, the Bitcoin market has seen major funds, public companies, and high-profile investors invest in the cryptocurrency. Most recently, the $2.8 trillion asset manager Fidelity Investments filed with the U.S. Securities and Exchange Commission (SEC) to launch a new Bitcoin fund.