Bitcoin May Hit $1M as Value Market Grows
In the midst of increasing volatility in the cryptocurrency markets, Matthew Hougan asserts that Bitcoin has the potential to reach $1 million per coin if the global store-of-value market continues to grow. The perspective arises as Bitcoin has experienced a significant correction from its peak of $126,198, now trading around $69,557, marking a decline of approximately 45 percent. Hougan posits that Bitcoin ought to be viewed as an emerging store-of-value asset akin to gold, rather than solely as a speculative investment. “When I joined crypto full-time in 2018, I used to hear people say that and laugh. “At the time, bitcoin was around $4,000, and $1 million sounded absurd even to me,” said Hougan. Over time, however, he asserts that earlier estimates underestimated Bitcoin’s potential due to the assumption that the store-of-value market is static. “I consider bitcoin to be an emerging store-of-value asset. It serves a purpose similar to gold, allowing people to hold wealth outside the traditional fiat and banking system, but in a digital form,” he said. “It is more volatile and less established than gold, but it is increasingly competing for the same market.” Hougan states that assessing Bitcoin’s potential value hinges on three key factors. The total size of the store-of-value market, Bitcoin’s share of that market, and the cryptocurrency’s fixed maximum supply of 21 million coins are key metrics to consider.
The global store-of-value market is currently valued at just under $38 trillion, with gold making up approximately $36 trillion and Bitcoin sitting at around $1.4 trillion. Based on that, Bitcoin accounts for just under 4 percent of the market. “This is why $1 million per bitcoin sounds unreasonable to many,” Hougan stated, noting that if the market stayed the same size, Bitcoin would have to secure over 50 percent of the store-of-value market to achieve that price point. Hougan highlighted that the gold market has experienced significant growth over the last twenty years. In 2004, when the inaugural gold exchange-traded fund made its debut in the United States, the overall value of the gold market stood at approximately $2.5 trillion. Today, it has surged to nearly $40 trillion, indicating a compound annual growth rate of approximately 13 percent. “The mistake people make when evaluating bitcoin’s potential is ignoring this growth,” Hougan stated. The store-of-value market, if it maintains its current growth trajectory, is projected to hit approximately $121 trillion within the next ten years. In that scenario, Bitcoin would only need to secure approximately 17 percent of the market to hit $1 million per coin, considering its capped supply.
Hougan stated that this shift is plausible given the ongoing rise in institutional adoption of Bitcoin. “A few years ago, there were no US bitcoin ETFs and few institutional holders, and bitcoin was considered too volatile to warrant anything above a 1 per cent allocation,” he stated. “Now bitcoin ETFs have demonstrated themselves as the fastest-growing ETFs in history, with bitcoin being held by a diverse range of investors from the Harvard endowment to the Abu Dhabi sovereign wealth fund, and numerous professional investors are contemplating 5 per cent allocations.” Nonetheless, Hougan recognized that risks persist. He stated that the store-of-value market might not expand at the same rate observed in the last twenty years, especially if macroeconomic conditions shift or gold prices fall.
Another possibility is that Bitcoin might not succeed in capturing additional market share. Simultaneously, Hougan indicated that the projections might turn out to be conservative if worries about inflation, government debt, and currency debasement escalate. “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, leads you to much higher prices than we have today,” he stated.
