Just digital gold

It occurred to me freshly this morning that this community (the including myself) doesn’t fully appreciate what “digital gold” means.

First, I want to disclaim: I’m skeptical that bitcoin can do everything. I’m above-average versed in the potential of Bitcoin L2s and L3s. But, there’s almost no question to me that something like a Solana has an important place as a high TPS platform. So, alts aren’t exactly “****coins” to me. They are venture capital, and they will produce important things.

The general consensus, I think, is that Bitcoin has or will have achieved the role of “digital gold”. I think that’s fair. I think we all know no one will be building games on Bitcoin, for example. That seems silly. And games are a big part of our economy.

But, I don’t think we all appreciate what “digital gold” means. This is because gold itself hasn’t been used as the base layer of money properly in most all of our lifetimes. When gold was at its height, it was the measuring stick for all monetary value in the majority of the developed world.

Let’s try to see what that means (just looking this up now):

Total market cap of the top three companies in the world right now equals ~8 trillion. Total market cap of gold by itself right now is ~14.5 trillion. Let’s call this the top3 to gold ratio, and it’s about 0.55:1

Here’s the current picture:

Microsoft 211.29b rev, 3.1T mcap
Apple: 383b rev, 2.68 mcap Nvidia: 26.97b rev , 2.21 mcap Avg: 621.26rev , 2.66mcap Valuation ratio: mcap= 4.28x annual revenue Gold 2154 per ounce Top 3 companies market cap is equivalent to the value of 3.7 billion ounces of gold

Lets look at 1929:

Standard Oil: 1.52 million rev General Motors: 1.5 million rev Ford: 1.14 million Average: 1.39m rev (*4.28)= 5.95m mcap. Gold in 1929: 20.67 per ounce Top 3 companies market cap was equivalent to the value of 287,865 ounces of gold in 1929

So, in a sense gold has been devalued today compared to 1929.

There’s all kinds of problems with the above comparison. We didn’t use modern multiples for companies back then. Global markets mean top products should be worth more. (Although keep in mind I compared revenues, so this should be accounted for somewhat). Etc.

But, the general point is that gold was more dominant in 1929 than it is today. When we say Bitcoin is digital gold, we should think about it closer to 1929 gold than modern gold. This means we’re underestimating how big that is. The measuring stick for all monetary value has a very large addressable market.

I’m more sure that Bitcoin becomes gold than I am that Solana becomes Microsoft, for example.

There are problems with that comparison too, I know. That’s less important. My bigger point is that we shouldn’t sleep on what digital gold means.

What do you think?