BofAML's David Woo recently published a "fair value" for bitcoin which included, "Bottom-line: maximum market capitalization for Bitcoins as a store of value = $5bn". This was based on an assumption that Bitcoin will likely not compete meaningfully with gold as a store of value, because it's so volatile and new.
But I wonder how important gold's current volatility is to its owners. I've been operating under the assumption that gold's modern role in the economy has largely been a hedge against the tail risk of systemic failure of the financial system, and that this is because it's been safe to assume that in a post-fiat world, gold would be remonetized. Ben Bernanke stated this in response to Ron Paul asking him whether he thought gold was money, and it seems kind of obviously correct to me. But if gold were to become remonetized, then its volatility would presumably be significantly less than it is currently.
It seems to me that the existence of Bitcoin brings into serious question the assumption that gold would be king in a post-fiat world, and that bitcoin's current relative volatility is rather meaningless for this question. This would mean that if you're holding gold as a hedge, then you also need to diversify into bitcoin to "hedge your hedge". I have no idea what percentage, but can it really be assumed to be zero, as Woo implicitly assumed in his analysis? Even a single percent would introduce massive error in Woo's analysis.