Investors often find it hard to believe that Bitcoin can reach $1 million per coin. But Chief Investment Officer (CIO), Matt Hougan, of a multi-billion asset manager says this is usually due to misunderstandings about the value of the asset.
It is a memo The CIO of Bitwise Asset Management, who released a statement on Tuesday, argues that analysts often rely upon “static math” When thinking about the long-term potential of bitcoin, it is important to consider its price. According to Hougan, that approach ignores the fact that the market bitcoin competes in — the global store-of-value market — has expanded at a rapid pace for decades.
Hougan writes that many people immediately discount $1 million, as it represents a price increase of roughly 14 times current prices.
“$1 million sounded absurd—even to me,” Hougan wrote. “I no longer see it that way.”
Hougan described BTC as a new store of value asset. competes with gold. To estimate bitcoin’s future value, you would need to calculate the size of the global store of value market and then divide the result by Bitcoin’s market share. fixed supply The 21-million coin set.
According to Hougan, today’s global market for store of value is just below $38 trillion. It is dominated by gold and BTC.
About $36 trillion is made up of gold, and bitcoin makes about $1.4 billion, which represents slightly less than four percent.
A BTC price of $1,000,000 would seem unlikely if viewed through this lens. In order to achieve that level of price at today’s size of the market, it would be necessary for the crypto to take over half the value-storage market.
Hougan : Bitcoin will be the next to follow when market changes.
Hougan’s argument is based on the assumption the market will not stay static. Hougan cites the growth of the gold market’s capitalization in the last two decades to demonstrate that gold can be a valuable store of value during times of uncertainty.
In 2004, the U.S. Gold Exchange-Traded Fund launched, its market value was approximately $2.5 trillion.
In the years since, metals have risen in value to a staggering $40 trillion. Factors such as increasing government debt, rising geopolitical tensions and loosening monetary policy are driving this rise.
Hougan believes that if the market for store of value continues to grow at this pace it will reach $121 trillion in a decade. In this scenario, Bitcoin would have to take 17% of market share to achieve a $1,000,000 price per coin.
“The global “алудение оереди” market will be ~$121 trillion in 10 years,” Hougan wrote, “Bitcoin only needs to take 17% of the market to be worth $1 million a coin.”
Hougan, however, argues that the move is not unrealistic given Bitcoin’s growth in recent years.
Institutional adoption has acceleratedAfter the launch of U.S. bitcoin spot exchange-traded fund. The asset class has been allocated by large asset managers, sovereign wealth funds, endowments and other financial institutions. Meanwhile, professional investors increased their typical portfolio allocation from 1% towards levels of 5%.
Hougan admitted that projections are dependent on assumptions. Bitcoin could not gain its expected market share if the store of value market does not continue to grow as fast as it did in the last two decades.
Hougan, however, said that investors should not focus on the current market size but rather on what may happen to it in the future. He argues that the central error is to use a fixed number to evaluate an asset in a growing market.
“As I see it, the base case — That the store-of-value market will continue to grow as it has, and bitcoin will continue to gain market share as it has,” Hougan wrote, “leads you to much, much higher prices than we have today.
At the time of writing, Bitcoin is trading near $70,000.
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Source: bitcoinmagazine.com
