Bitcoin Outperforms Gold Since 2020: A Disastrous Investment for Gold?

Anthony Pompliano says Bitcoin has made gold a "disastrous investment" since 2020, with gold losing 84% of its purchasing power in Bitcoin terms during that time. Despite gold's record highs, one Bitcoin can now buy roughly 16 times more gold than it could in 2020. Pompliano's argument underscores Bitcoin's evolution as a benchmark for capital preservation and performance.

Anthony Pompliano, a prominent Bitcoin advocate, recently claimed that Bitcoin has made gold a "disastrous investment" since 2020. His argument is based on gold's significant loss of purchasing power in Bitcoin terms during this period. Specifically, one Bitcoin can now buy roughly 16 times more gold than it could in 2020, highlighting Bitcoin's growing influence as a benchmark for capital preservation and performance.

To understand this shift, it's essential to compare the two assets using a fair value framework. JPMorgan's analysis provides a useful starting point. According to the investment bank, Bitcoin's theoretical price target, based on equating its total market value with the value of gold held privately for investment purposes, would be $313,800 Bitcoin Vs. Gold: Why The Crypto’s “Fair Value” Could Be Higher Than You Think^[1]. However, this model underestimates Bitcoin's true value by ignoring its higher utility and more limited supply.

Bitcoin's utility is significantly greater than gold's. While gold primarily serves as a store of value and can be used for jewelry, Bitcoin offers various use cases, including payments, money transfers, lending, and collateral. This additional utility adds substantial value to Bitcoin, a factor that JPMorgan's framework overlooks.

Furthermore, Bitcoin's supply is more capped than gold's. After last year's halving event, only 3.125 new bitcoins are mined every ten minutes, representing a 0.8% annual expansion. In contrast, gold's supply increases at a rate of approximately 1.7% annually. Additionally, gold has proven reserves that could potentially increase by 25%, while Bitcoin's supply is capped at 21 million coins. This naturally constrained supply boosts Bitcoin's value as a rarer asset.

Pompliano's argument underscores Bitcoin's evolution as a benchmark for capital preservation and performance. Despite gold's record highs, its purchasing power in Bitcoin terms has significantly declined. This shift highlights the growing importance of Bitcoin as a store of value and a medium of exchange, challenging traditional asset classes like gold.