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For years, investors have been predicting a Bitcoin price of one million dollars as the ultimate goal. As early as 2009, Bitcoin legend Hal Finney predicted a market value of up to ten million dollars. But how realistic is a seven-figure forecast really? Bitwise CIO Matt Hougan explains why the price target will arrive sooner than many investors suspect today.
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Bitcoin Price at $1 Million: How Realistic Is That?
For years, a Bitcoin price of one million dollars has been the dream of Bitcoiners. But how realistic is this price target really? Is a seven-figure market value even possible or just too utopian? Bitwise investment manager Matt Hougan now provides an answer, which he published on LinkedIn.
- Bitcoin
(BTC) - Price $70,356.00
- Market Cap
$1.41 T
“A financial advisor recently asked me: ‘Matt, do you really believe that each Bitcoin could be worth a million dollars?’ That’s a crazy number. I understand his perspective. A million dollars sounds crazy. That would mean the Bitcoin price would have to rise 14-fold from today’s price,” Hougan begins his post.
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Hougan himself once considered a seven-figure market value nonsensical. Back in 2018, he laughed when Bitcoiners predicted a million-dollar value. At that time, BTC was trading at $4,000. Since then, however, the tables have turned.
“The more time I spent studying this asset, the more I realized that I—just like my advisor friend—had made a pretty fundamental mistake in analyzing Bitcoin’s chances,” Hougan writes.
Bitcoin’s primary role is that of a store of value. In this function, the cryptocurrency competes with other assets—such as gold. For the appropriate valuation of Bitcoin, this classification is the crucial foundation.
“Against this backdrop, the basic calculation for estimating its value is quite simple: estimate the size of the store-of-value market, estimate Bitcoin’s share of that market, and divide that value by 21 million (the maximum total supply of Bitcoin). This gives you an implied price,” the investment manager argues.
Currently, gold dominates this market. The precious metal accounts for a large portion with a market capitalization of $36 trillion. Bitcoin appears comparatively small with $1.4 trillion and a market share of 4%.
Why BTC Is Closer to a Million Than Investors Think
Here’s the crux: if Bitcoin wanted to rise to a market value of one million dollars, the cryptocurrency would have to capture about half of the entire market. At first glance, that sounds unrealistic. After all, competitor gold is far better established than the comparatively young cryptocurrency.
“But that’s the point most people miss: the store-of-value market is not static. In fact, it has grown dramatically over the past two decades. And as concerns about fiat currency devaluation increase, I suspect this trend will continue,” Hougan writes.
In other words: the entire store-of-value market will most likely grow in the future—Bitcoin just like gold. So BTC wouldn’t even have to take market share away from gold, but only maintain its technical reliability.
How extreme this development has been over recent decades is shown by looking at gold’s value growth. Back in 2004, gold had a market capitalization of $2.4 trillion. That corresponds to the current total value of the crypto market.
This Crucial Characteristic Connects Bitcoin and Gold
The precious metal has grown by 13% per year since 2004. The fact that gold was able to achieve this rapid value development is connected to an important characteristic: it is not dependent on the management of state authorities and cannot be arbitrarily increased or reduced by them.
This crucial characteristic connects gold and Bitcoin. Both assets are distinguished by their independence from state influence. This is of central importance for further value gains.
People use stores of value of this kind because they expect the loss of value or even the collapse of state-controlled fiat currencies.
“Due to growing concerns about government debt, geopolitical uncertainty, loose monetary policy, and other factors,” stores of value are likely to continue growing in the future, Hougan predicts.
If growth continues at the current rate, the total value of stores of value will exceed $121 trillion in just ten years. Then BTC would only need to have about 17% of the market capitalization to achieve a market value of one million dollars.
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