How big can Bitcoin really get?

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We anticipate significant growth as digital asset use cases for Bitcoin’s store of value idea mature, as characterized by regulatory clarity, more institutional participation, and mainstream adoption.

In our opinion, we are merely in the early stages of a dramatic shift in applicability across most sectors that will occur over the next 20 years. According to estimates published by Bank of America’s latest cryptocurrency report, around 221 million people worldwide exchanged a cryptocurrency or used a blockchain-based application as of June’21, up from 66 million at the end of May’20.

Furthermore, by investing in Bitcoin, huge institutions and hedge funds are not risking losing out on it as a digital asset class. According to a PWC survey, over one-fifth of hedge funds (21%) invest in digital assets, accounting for 3 percent of total hedge fund AUM. More than 85 percent of those hedge funds want to raise their interests in the asset class by the end of 2021. This is likely to increase with time.

Global Wealth Data

Without real estate, global financial wealth is estimated to be around $275 trillion. More than $100 trillion is owned or managed by institutions. The majority of the $88 trillion owned by HNW people is handled by institutions. Ray Dalio, Michael Saylor, Stan Druckenmiller, and Paul Tudor Jones, among others, have all disclosed bitcoin allocations. Last year, PTJ announced a 2% rise, which was boosted to 5% this year, and JPMorgan, launched in house Bitcon fund.

Emerging affluent, who are the high end of the mass market, or individuals with US$100,000 to US$1,000,000 of liquid financial assets plus an annual household income over US$75,000, hold approximately $77 Trillion.

Due to their long time horizons, pension funds and large insurance firms, which collectively control $84 trillion in assets, must safeguard themselves against fiat currency depreciation. The bonds they hold can no longer keep up with the pace of inflation, which has been at an all-time high since the 1980’s. Top rated 100 year old insurance firms, such as MassMutual, have already begun allocating to bitcoin.

Nation-state assets total $24.4 trillion, including sovereign wealth funds and exchange reserves. Even if they believe bitcoin is unlikely to become the world’s reserve currency, having bitcoin gives them the possibility of outrunning all other nations. This means they may buy bitcoin with their $24 trillion in reserves without making bitcoin legal tender. According to official figures, Singapore has a more than $300 billion state wealth fund that buys bitcoin directly from miners, while El Salvador has bought over 1,120 bitcoin worth over $66 million.

Bottom Line

Assuming that just $1 trillion of the $275 trillion in assets is converted into bitcoin, and taking into consideration statistics from Glassnode, where there are so many long term holders of bitcoin and a limited supply, there will not be a 1:1 correlation between purchases and market pricing. In March, for example, Bank of America observed that it only took $93 million in new purchases to boost the price of bitcoin by 1%. Given the market size at the time, that equates to a 100 percent growth in market capitalization for every one percent increase in new purchases.

We believe this will take time, and given the time frames and the exponential rise of blockchain and cryptocurrencies, we estimate that a single Bitcoin will be valued between $400,000 and $600,000 by 2026.

DISCLAIMER: The information contained in this article is for educational purposes only and does not constitute any form of advice or recommendation by Wheatstones, and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.

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