Bitcoin needs to account for just one-sixth of the global “store of value” market, currently dominated by gold, to reach $1 million per coin, argues Matt Hougan, Bitwise’s chief investment officer.
In Tuesday’s Hougan blog post he said most reject the lofty prediction for Bitcoin because it would require Bitcoin to convert to 50% of the current market value of gold.
Hougan, however, said the “mistake” most people make is to ignore the rise in gold prices and the broader “stock of value” market.
Since 2004, gold’s market capitalization has grown by about 13% annually, from $2.5 trillion to about $38 trillion, on “growing concerns about government debt, geopolitical uncertainty, accommodative monetary policy and other factors.”
“If this rate of growth continues, the global ‘stores of value’ market will continue to do so [around] $121 trillion in 10 years. At this level, Bitcoin only needs 17% of the market for the coin to be worth $1 million.
Related: Bitcoin Undervalued Against Potential Growth in Gold Signals: Analyst
Hougan cited the growth of institutional investments such as exchange-traded funds, sovereign wealth funds, and increasing portfolio allocation as potential catalysts.
“There is still a lot of work to be done, but given these trends, capturing one-sixth of the value market in 10 years does not seem extreme,” he said, adding:
“In my view, the base case scenario – that the store of value market continues to grow at its current rate and Bitcoin continues to gain market share – leads to much, much higher prices than we have today.”
The divergence of Bitcoin and gold is deepening
Hougan’s million-dollar Bitcoin (BTC) thesis is that the asset will continue to converge with gold; however, the last few months have shown that the price of Bitcoin is not in line with gold.
The price of gold hit an all-time high of $5,327 an ounce in tardy January and is just 2.2% below today’s price, while Bitcoin is currently down 44% from its October high.
Billionaire investor Ray Dalio warned against Bitcoin as a long-term store of value and protected haven in early March, stating that gold was much better.
He argued that central banks are not buying BTC, which he believes is behaving more like technology stocks.
Greg Cipolaro, global head of research at NYDIG, he said On March 6, it emerged that Bitcoin “is not currently valued as a macro-hedge, sovereign risk hedge, or real-rate or inflation-driven transaction.”
“These dynamics help explain ongoing frustration with Bitcoin’s failure to ‘act like gold’ despite its digital gold label.”
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