Bitcoin is hitting a fevered pace.
Is this more hype or do we have some legs behind what is taking place? Before answering that, let us dive into what the numbers could mean.
Some are predicting that Bitcoin could surpass the total value of gold. This would put Bitcoin in the $16 trillion range. Looking at the total number of Bitcoin, we can see how this would be $800K-$1M per coin. Of course, this depends upon how many BTC one believes are truly available, with some estimates that more than 5 million were lost.
These numbers are absurd. Or are they? When it comes to Bitcoin, we have to be clear on what we are dealing with.
We will dig into this.
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Bitcoin To $16 Trillion?
There is a lot of nonsense out there about Bitcoin. Actually, this stems from a misunderstanding surrounding the Fed, inflation, and money. It led to outdated ideologies that are not applicable in today's economy. On top of that, it takes the ire off those who are really causing the problem and places it elsewhere.
That said, what are we dealing with?
Money provides two key components: medium of exchange and unit of account. It can be a store of value but, as evidenced by markets, does not always serve that purpose.
With Bitcoin, there is little medium of exchange. This narrative is dying down yet is still prevalent. Some believe that BTC will be used to buy things. It is not going to happen.
There are a couple reasons for this. To start, price stability is not part of Bitcoin's makeup. The reason why it is a great trading vehicle makes it a lousy medium of exchange. Second, distribution is a problem. Currency needs to be widespread to be utilized. Bitcoin is a HODLer asset. This is only growing as Wall Street firms custody billions in BTC.
That leave the unit of account.
Again, we have a few on the fringe that believe evertyhing will be price in Satoshi. This is unlikely due to human tendencies. There are four generations of people who understand the US Dollar. They know how many are in a barrel of oil and a tuna fish sandwich.
There are hundreds of trillions in global debt, much of it priced in USD. Then we have an similar amount on balance sheets, using the same denomination. Today, the dollar evolved into a mesaurement, like a kilometer.
If this is the case, how can Bitcoin ascend to such high levels? Is it a hype cycle?
Actually, there is a valid reason for this.
Confidence In Bitcoin
Governments are suddenly talking about Bitcoin as a strategic reserve. Each week, there are a couple officials that gain publicity for proposing the idea. This can be at the federal, state, or provincial levels.
Trump made headlines on the campaign trail, stating that he would push the United States in that direction. This is supported by a bill in the US Congress put forth by Cynthia Lummis, the senator from Wyoming.
The latest headline is Japan, who is looking at making Bitcoin part of its reserve. In the United States, Texas made a similar announcement earlier in the week.
Bitcoin could surpass the gold market if there is the confidence in this asset. Monetary and financial history helps us to understand this is the basis. Considence is the name of the game. Whatever large numbers of people believe in is what is utilized.
This is true for assets, currency, and institutions. Another way of looking at this is to focus upon what occurs when confidence flips. What happens when people lose confidence in something financial or monetary? Things collapse.
We see this with stocks, real estate, currencies, and financial institutions. A bank run is nothing more than a loss of confidence.
Thus, the question with Bitcoin is not whether it has inherent value. Instead, with Bitcoin it boils down to whether the confidence as an asset is real or not?
If the answer is negative, then we are looking at a lot of hype. However, the discussion around the leading cryptocurrency appears to have validity. For it to follow through requires action. As they say, talk is cheap.
The proposed ideas around Bitcoin being part of reserves, if passed, would provide a lot of buy demand. This changes the entire equation. Here is where we could see a massive move, one which eventually pushes the value towards the level of gold.
Bitcoin is misleading. It is not a currency. Instead, view it as a digital asset. Most are trying to apply the idea of currency to something that does not have their properties.
We are dealing with a financial asset. Hence, confidence is the barometer that we use to judge the future direction of things.
Is the confidence in Bitcoin increasing? If so, along with being sustained, then we could see the gold level targeted. Based upon market capitalization, this would put the $16 trillion figure in play.
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Confidence is steadily increasing, although with the Microsoft rejection you wouldn't know it. Eight years ago I would have said there was not way BTC would hit $100K, so I called that one all wrong. That being said could it hit $800K? All bets are off, it may well do that and even surpass one million dollars. It won't be this year or even likely next, but in five years things could be very interesting!
The Microsoft vote did surprise me but is nothing more than a bump in the road. Governments are dealing with bigger dollars. I saw a headline where even towns and cities are proposing this idea.
Proposals mean nothing. We will have to see what starts getting passed. But there could be some floodgates open if these ideas become law.
I do not doubt bitcoin surpassing the gold market when considering both rarity and flexibility. Consider what price bitcoin will hit should Blackrock throw in like 5% of their assets. Will they or should I say won't they? This big players are just waiting for all round approval to trigger price. They've all seen the advantage of this digital asset.
We did not talk about distribution. The enormous market cap will be spread, mostly, to the larger players. We are already seeing that.
Fixed money always pools.
The larger players are indeed waiting for the control. It's a pity we may be rolling back to what we've tried to avoid
I believe 16 trillion is probably underhanded too. If BTC receives the recognition and adoption on the kind of level that is beginning to appear, then it is possible BTC makes a play for much higher.
I mean no one knows for sure where the MC will level out, but the signs are pointing to very soon 100k is going to be a distant memory. On leverage alone, at the rate of BTC leaving exchanges, prior to countries buying in for reserves, we will need a much higher priced BTC to cover leverage volume within a year or 18 months from now. Just today alone another -8400 BTC from all exchanges and just 2.254 million left.
We can assume many countries and entities are already aquiring Bitcoin now under the radar as to not spook the market.
Exciting times ahead.
What happens when there is no more coins left and everyone is just holding them?
Supply/demand 101.
If there is still confidence in the asset and people want it, they will have to pay up. There is always someone willing to sell.
Everyone has a price. There will always be Satoshi's for sale. How high BTC climbs will be entirely dependant on mindset of the HODLER. If large institutions/governments decide to buy and hold indefinitely then we may see astronomical pricing upwards of 1 mill per BTC.
I think it depends on the mindset. If store of value reaches those kind of levels, BTC may end up being so profitable just to hold, people wont even need to sell. E.G Companies/Banks/Institutions will offer additional returns just for you to store your BTC on their balance sheets or platform. And I'm thinking the kind of potential returns here are going to be much more lucrative the the measily 5% or 10% we currently get storing fiat with such entities like banks, 401ks and Superannuation stlye businesses.
E.G:
keeping your BTC in an exchange wallet as a form of term deposit so they can leverage your BTC for their own profitable programs such as leverage trading.
Storing your BTC in a term deposit style offering to banks/institutions like what many already do for new crypto projects where your BTC is locked for a certain period with a certain return on offer over that period. With crypto friendly regulations protecting you from foul play on regulated projects that have passed through proper channels and given the green light by authorities etc.
Mircrostraegy styled offerings where you offer them fiat or BTC on loan and they buy BTC offering you a guaranteed future return of good %.
So when you hear people say never sell your BTC, it's not because they are just wanting to see a squeeze on price to sell on, it's because many of us believe at a certain price point, you wont even need to sell to make eye watering ROI.
Based upon how things are rolling out, it is highly possible that 100K is in the rear view mirror. If governments start passing laws that state BTC is part of the reserve, that could generate a lot of buy pressure.
well, i think btc with a 16 trillion marketcap is possible to happen but at least by 2033 or so but at the end it's all about the trust, i agree that a currency can't b just 21 million pieces but why not b the satoshi it's much much more than 21 million pieces?, i believe that satoshi nakamoto wanted btc to serve as a currency & the way i can see it happen is through the usage of satoshi instead of full btcs but again it's all about trust & the 2 materials i can think of that people kept trusting n them for thousands of years r gold & silver, so f hundreds of years from now btc is still trusted by people it will join gold & silver, on the other hand btc usage as a reserve is already happening n some places & believe it will continue & spread n more major countries -US, china, russia, germany, japan, etc. again it's all about trust & no one knows the future but we try to predict. nice post- well done, have a great day