Behind Goldman's Huge Bitcoin Prediction

I don't have to tell you that financial powerhouses are quickly realizing that Bitcoin (BTC) and blockchain technology are revolutionizing the way we do just about everything, from conducting business to making financial transactions.

In fact, we took a deep dive into Bank of America's bombshell crypto report that pointed out in no uncertain terms that crypto is simply "too large to ignore." The report also made clear the transformative power of blockchain, where use cases are seemingly endless.

We also broke down the details behind Deloitte's Blockchain Survey, where blockchain made compelling business cases across the board. The report also made it apparent that if businesses don't get into the blockchain game, they did so at their own peril.

So, I wasn't exactly surprised when I found out that financial powerhouse Goldman Sachs was making some bold predictions about where Bitcoin prices are headed. But when I did a deep dive into the numbers, I found their predictions could even be on the low side.

I'm going to show you what I mean about the Goldman price prediction. I'm also going to give you my take on the bullish Bitcoin and blockchain comments made by Goldman's former boss Lloyd Blankfein and Bloomberg's senior commodity strategist Mike McGlone.

So, let's get to it!

Goldman: Bitcoin to $100K

I stuck my neck out a couple of weeks ago when I said that Bitcoin was like headed to $100K and above in 2022. To be exact, I feel it's headed to $113,972. When I crunched those numbers, I was looking at the overall price of the stock market compared to Bitcoin's market cap. I also through in some technical muscle to come up with my price prediction.

So, I was pleasantly surprised when I found that Goldman predicts that Bitcoin could hit $100K within the next 5 years. And they came up with that number by comparing gold's market cap to BTC's. Here's what Zach Pandl, co-head of foreign exchange strategy at Goldman Sachs said:

"Bitcoin may have applications beyond simply a 'store of value'—and digital asset markets are much bigger than bitcoin—but we think that comparing its market capitalization to gold can help put parameters on plausible outcomes for bitcoin returns … Hypothetically, if bitcoin's share of the store of value market were to rise to 50% over the next five years (with no growth in overall demand for stores of value), its price would increase to just over $100,000, for a compound annualized return of 17% to 18%." (Source)

The way I see it that could just be the beginning. Here's what I mean.

Right now, Bitcoin's price is $39K, with a market cap is at $732 billion. Meanwhile, gold's market cap sits at about $11.4 trillion. Comparing the two, Bitcoin is less than 1/10th the size of the gold market. In fact, it sits at just 6%.

So, using that calculus, Bitcoin could triple in price to $117K, which would yield a market cap of $2.2 trillion, and it would still be less than 1/5th the size of the gold market.

You read that right: If less than 1/5th of the total gold market out there decided to swing out of gold and into Bitcoin, the price of Bitcoin could easily eclipse $117K.

Of course, this argument hangs on the idea that Bitcoin is a good store of value. Is it? Without a doubt. It has all the qualities that make something valuable: Scalability, portability, and divisibility. But most importantly, it has the most important feature of a good store of value: Scarcity. Bitcoin is capped at 21 million coins. Period.

Speaking of Goldman, I wasn't just surprised by their Bitcoin price prediction: I was also taken aback by how bullish their former head, Lloyd Blankfein, was on Bitcoin in particular and the blockchain space in general. While he wasn't making price predictions, his outlook is huge:

"It's lost a lot of value, but at a point where it's trillions of dollars of value contributing to it and whole ecosystems are growing around it," he said. "Of course, we have the benefits of instantaneous transfer and reduction of credit risk and all the benefits of blockchain." (Source)

And if you're looking for more than Goldman and me to tell you that Bitcoin is likely headed higher, no need to look any further: Here's what Bloomberg senior commodity strategist Mike McGlone had to say recently:

"I think it [bitcoin's price] is building a good base here around $40,000, and I think it's going to take it at that level. It's more likely to accelerate towards $100,000." (Source)

And driving the price for McGlone is much like what we're talking about here today: Bitcoin's transformation from a speculative asset to a reliable store of value.

A Word Of Warning

Unless you've been under a rock recently, and if you're a stock market investor, there's been no place to hide: Pretty much everything has been getting sold.

And while we've had some buying, I don't think this consolidation in stocks, and tech in specific is over. You're going to see a bit of chop for a while.

But fundamentally, nothing has changed. Demand is huge. Companies can't find enough workers. And innovation is everywhere you look. Sure, the Fed is going to turn to slow the spigot. But it has no choice considering the inflation numbers. And that's a good thing, not a bad thing.

So, don't throw the baby out with the bathwater. Whether it's stock or crypto, keep a keen eye on fundamentals and invest for the long term.

And don't forget: When it comes to crypto, don't devote any more than 1% to 2% of your portfolio.

Wayne Burritt Contributor

Disclosure: This contributor may own cryptocurrencies mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from for their opinion.