Some Musings About The Awesome Price Bitcoin Can Reach In The Future
It is impressive when you think that Bitcoin is still in early stage.
Generally speaking, everyone wonders what the price of Bitcoin will be in 2020. Better yet, everyone is wondering what the price of Bitcoin will be in 5 years or even 20 years from now. Whether or not you are involved in the cryptocurrency industry, you have been wondering about the maximum price Bitcoin can reach in the future.
To help you answer this question, I suggest you put Bitcoin’s current market capitalization in perspective with that of large publicly traded technology companies such as Apple, Microsoft or Amazon, with gold or with the stock market as a whole.
This perspective will help you to better understand the phenomenal growth opportunities that Bitcoin will have in the future as this technology is still in its early stages.
Bitcoin Compared With GAFAM
At the beginning of the year 2020, Bitcoin has a price close to $7,400 with a market capitalization of around $134 billion. This last figure in itself is phenomenal when you consider that Bitcoin was created by Satoshi Nakamoto just over 10 years ago.
Comparing the current market capitalization of Bitcoin to that of GAFAM is very instructive:
With its $134 billion market capitalization, Bitcoin is not ridiculous, but still can’t stand comparison with Facebook, Amazon, Alphabet, Microsoft and Apple.
As a reminder, Microsoft and Apple exceed $1 trillion in market capitalization while Amazon and Alphabet are not far off.
Nevertheless, Bitcoin and these technology companies are not at the same stage in their history.
In addition, Bitcoin has a much more ambitious and important goal for the world than any of the GAFAMs.
These GAFAMs are private companies run with an iron fist by their CEO and logically aim to make as much profit as possible. In order to make more and more profits, they are ready to sacrifice the privacy of users and to centralize more and more information while arbitrarily censoring users.
Bitcoin has no leader and aims to build a fairer system for the whole world.
Bitcoin is just 11 years old. So I think it’s fairer to compare its market capitalization to that of Google, which has since become Alphabet, Facebook and Amazon when these technology companies were only 11 years old:
The comparison is immediately more interesting for Bitcoin which is far ahead of Amazon which was at $30B of capitalization after 11 years of existence. Bitcoin is also much closer to Google and Facebook which had market capitalizations of $200B and $230B respectively after 11 years of existence.
As Bitcoin aims to become an alternative to the current monetary and financial system, these growth prospects seem to me to be higher than those of the GAFAMs which are driven solely by profit.
Bitcoin Compared With Gold And Other Markets
Since its inception, Bitcoin has often been compared to gold. Many even refer to Bitcoin as digital gold. It is true that Bitcoin exists in a finite quantity known as gold and that the process of creating new Bitcoins, which is known as mining, can be compared to extracting gold.
In fact, it seems interesting to me to compare the capitalization of Bitcoin with the stock of gold held as a whole.
The world’s gold stock is the equivalent of $8T which is almost 60 times larger than the current capitalization of Bitcoin :
The previous chart also shows how low the valuation of the world gold stock in U.S. dollar is compared to the following indicators:
- The global capitalization of the stock market, which reached $73T
- The global money supply that reaches $90T
- The global real estate market reaching $228T as a whole
- The global debt which is astronomically high at $246T
On this chart, Bitcoin and its $134 billion market capitalization is not even visible because this amount is so derisory compared to gold or the global capitalization of the stock market.
Bitcoin Is Still In Its Initial Phase
These comparisons are very interesting as Bitcoin is still in its initial phase. In the adoption life cycle of a technology, Bitcoin is entering “The Chasm” phase:
This is a crucial moment for the future of Bitcoin. Its future will be determined by how it manages to face this critical phase.
Bitcoin’s Success In The Future Will Depend How It Emerges From The Chasm Phase
Bitcoin must successfully complete this phase to hope for mass adoption.
If Bitcoin manages to pass the “The Chasm” phase with flying colors in the coming years, then we can expect a very strong acceleration in its adoption.
You should therefore be aware that the current market capitalization of Bitcoin is already immense while mass adoption by the general public is still a long way off.
The Growth Potential Of The Bitcoin Price Is Enormous
As Bitcoin moves towards mass adoption by the general public, the price of Bitcoin is bound to rise sharply. Many predictions, more or less based on arguments, exist about the future price Bitcoin could reach.
A first order of thought on the price Bitcoin could reach in the future is to rely on the valuation of the world gold stock considering that the market capitalization of Bitcoin will reach this amount.
If the market capitalization of Bitcoin reaches the value of the world’s gold stock, it would be around $8T.
At a time when Bitcoin’s capitalization could reach $8T, it is not certain that the 21 million Bitcoins have been mined. Nevertheless, for my estimate, I will assume that those 21 million Bitcoins are already in circulation.
This will only slightly understate my calculations.
With a market capitalization of $8T and 21 million BTC outstanding, the price of Bitcoin would be around $380K.
With this quick calculation, you can see why people who predict that Bitcoin will reach $100K in the coming decade must be taken very seriously.
Another quick simulation can be done starting from the global stock market capitalization of $90T.
Let’s imagine for a moment that the cryptocurrency market will reach even half of the global capitalization of this market. This would give us a cryptocurrency market with a market capitalization of $45T.
Bitcoin currently dominates nearly 70% of the overall market capitalization of the cryptocurrency market.
If we consider that Bitcoin maintains this dominance, we would have a market capitalization of $31T for Bitcoin.
With 21 million BTC in circulation, this market capitalization will give a Bitcoin price of about $1.47M.
This last calculation allows you to better understand the reasoning of those who preside that the price of Bitcoin will reach $1 million in the future.
All these calculations are just assumptions, but you have to at least admit that they suggest that the growth potential of the price of Bitcoin is enormous.
No one would have thought at the beginning of 2009 that Bitcoin would be such a phenomenal success in the 2010s. Not even its creator Satoshi Nakamoto. Yet, Bitcoin was the most successful asset of the decade, turning $1 invested in 2010 into $90,000 by the end of 2019.
For the coming decade, the potential for Bitcoin’s price growth remains enormous. Its scarcity and the fact that its technology is still in its infancy point to a strong increase in its market capitalization.
If Bitcoin were to reach even the valuation of the world’s gold stock, its price would easily exceed $100K. The coming decade will provide us with the first answers about the price Bitcoin can reach in the future and it promises to be an exciting decade.