Bitcoin News: Most critics argue that even the current Bitcoin price of over $35,000 is already too high, mainly because of the lack of real-world uses and applications for the Bitcoin network. But the truth is that the crypto asset is already heavily used as a store of value today, and this core utility of Bitcoin could potentially drive its price up to $1 million per coin.
Bitcoin is often referred to as “digital gold”, but the situation is more complex. Gold has historically operated as the preferred store of value from a monetary perspective, but many other assets have also acted as alternative stores of value under the current fiat currency standard.
reach $1 million
When a currency like the US dollar is inflationary, people often look for alternative investments such as traditional stocks, real estate, and government bonds to keep their savings from depreciating. Cryptocurrencies are now part of this list of alternative investments and are even poised to displace some of these other assets.
Although there are currently 6.25 new bitcoins mined by miners approximately every ten minutes, the total supply will be capped at 21 million. This means that a bitcoin price of $1 million would equal a total supply value of $21 trillion.
Is this assessment realistic? Let’s take a look at some of the markets that Bitcoin could demolish as a store of value.
The size of the global bond market was recently estimated at $119 trillion by the Securities Industry and Financial Markets Association (SIFMA). At the same time, the yields earned on many of these bonds are at an all-time low. In fact, these bonds have $18 trillion worth of negative returns. In the current state of the bond market, Bridgewater Associates Chief Investment Officer Ray Dalio recently said that he personally prefers owning Bitcoin rather than bonds.
For example, let’s say 10% of the global bond market ($11.9 trillion) owners want to sell their assets for Bitcoin. At least at current prices, they can’t, because there’s currently less than $1 trillion in Bitcoin and bondholders can’t buy that amount of Bitcoin, which means the price has to increase drastically to absorb buy orders. It’s a simple supply and demand situation.
Or let’s imagine that a quarter of the gold market has moved to Bitcoin. That would equate to another $3 trillion of buying pressure. Suppose two percent of the roughly $300 trillion held in global equities and real estate markets moves into Bitcoin, then that would be another $6 trillion.
We’re talking about $20.9 trillion of hypothetical buying pressure from these four markets (bonds, gold, equities, and real estate).
Remember, not all coins are for sale, so if all of that money were to move into the crypto asset, the total value of the Bitcoin market would be much more than $20.9 trillion. Some estimates put the impact of new buy orders on Bitcoin’s market cap as 25 times the value of the purchases, so $1M seems pretty conservative in that regard. While this buying pressure is unlikely to happen tomorrow, Bitcoin will certainly benefit from fragile global markets and uncertainty as an exciting new asset class.