Bitwise Chief Investment Officer Matt Hougan on Tuesday published a report showing Bitcoin (CRYPTO: BTC) could reach $1 million per coin if the store-of-value market grows to $121 trillion in 10 years and BTC captures 17% market share, up from 4% today.
The Store-of-Value Market Growth
The current store-of-value market stands at just under $38 trillion: $36 trillion for gold and $1.4 trillion for Bitcoin.
On this basis, Bitcoin currently represents just under 4% of the market.
The mistake most people make is assuming the store-of-value market is static, the report states.
Gold’s market cap was about $2.5 trillion when the first gold ETF launched in 2004. It has grown to almost $40 trillion, a compound annual growth rate of 13% per year.
If this 13% growth rate continues, the global store-of-value market will reach approximately $121 trillion in 10 years.
At that level, Bitcoin only needs to capture 17% of the market to reach $1 million per coin.
The Path From 4% To 17%
Moving from 4% to 17% market share represents significant growth but falls within recent trends.
A few years ago, there were no U.S. Bitcoin ETFs and few institutional holders. Bitcoin was considered too volatile to warrant anything above a 1% allocation.
Now Bitcoin ETFs have proven to be the fastest-growing ETFs of all time. Bitcoin is owned by everyone from the Harvard endowment to the Abu Dhabi sovereign wealth fund.
Long-term volatility has declined to the point that many professional investors are considering 5% allocations.
Capturing one-sixth of the store-of-value market in 10 years doesn’t seem extreme given these developments. It appears more like a continuation of recent institutional adoption trends.
The Growth Drivers
Gold’s 13% annual growth over the past two decades stemmed from rising concerns about government debt, geopolitical uncertainty, and easy monetary policy.
These same factors could accelerate in the next decade as government debt levels reach crisis points.
The past two decades featured a global financial crisis, the invention of quantitative easing, and extended low interest rates.
If concerns about fiat currency debasement spread further, the store-of-value market could grow faster than 13% annually.
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