Many critics say the current bitcoin (BTC) price of $35,000 or so is already too much. They stress that the lack of real-world uses for Bitcoin as evidence of it being just a Ponzi scheme.
But the reality is it is already in heavy use as a value store, and this founding utility of bitcoin might mean its price goes to $1 million per coin.
Bitcoin is often said to be the “digital gold,” but the issue is more complicated. Gold has been the preferred value store from a monetary perspective, but other assets have also been alternative stores under the fiat standard.
When a currency is inflationary, people seek alternative investments — like stocks and real estate — to get around the depreciation of their money. Cryptocurrencies are now among these alternative value stores, and they could disrupt some of the other assets.
Getting to $1 million
Although there are around 6.25 new bitcoins given by miners every ten minutes or so, the total amount will cap at 21 million. Because of this, a $1 million bitcoin per-coin price would mean a total value of $21 trillion.
Is that a realistic number? Let’s look at other markets that bitcoin might disrupt as a value store.
The size of the overall bond market was estimated at $119 trillion. Yields earned those bonds are at or close to all-time lows. Around $18 trillion worth of those bonds give negative yields.
So let’s imagine that investors of 10% of the global bond market (which comes to $11.9 trillion) want to switch to bitcoin. They can’t at current prices because there are less than $1 trillion of bitcoin in existence and only some of bitcoin’s supply is available to be bought on exchanges. In other words, these bond holders could not purchase that amount of bitcoin, meaning the price they pay for their bitcoin on exchanges would need to greatly increase to complete their buy orders. It is a simple demand and supply issue.
Another one: let’s imagine one fourth of the gold market switch over to bitcoin. That would equal an additional $3 trillion of buying pressure. Say two percent of the $300 trillion global real estate and equities market goes into bitcoin, that is another $6 trillion.
With these changes, you could see around $20.9 trillion worth of possible buying pressure. The opportunity here could be exponential.
Author: Scott Dowdy