Bitcoin needs to make up just one-sixth of the global “store of value” market, currently dominated by gold, to reach $1 million per coin, argues Bitwise chief investment officer Matt Hougan.
In a blog post on Tuesday, Hougan said that most dismiss the lofty forecast for Bitcoin, as it would require Bitcoin to muscle into 50% of gold’s current market value.
However, Hougan said the “mistake” most people are making is ignoring the growth of gold and the broader “store of value” market.
Gold’s market cap has grown at around 13% annually since 2004, from $2.5 trillion to around $38 trillion, driven by “rising concerns about government debt, geopolitical uncertainty, easy monetary policy, and other factors.”
“If this growth rate continues, the global ‘store of value’ market will be [around] $121 trillion in 10 years. At that level, Bitcoin only needs to take 17% of the market to be worth $1 million a coin.”
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Hougan cited the growth of institutional investment, such as exchange-traded funds, sovereign wealth funds, and increasing portfolio allocations as potential catalysts.
“There are still miles to go, but with these undercurrents, capturing one-sixth of the store-of-value market in 10 years doesn’t seem extreme,” he said, adding:
“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, much higher prices than we have today.”
Bitcoin and gold divergence deepens
Hougan’s million-dollar Bitcoin (BTC) thesis depends on the asset continuing to converge with gold; however, the last several months have shown that Bitcoin hasn’t been moving in lockstep with gold.
The price of gold hit an all-time high of $5,327 per ounce in late January, and it is just 2.2% away from that today, whereas Bitcoin is currently trading down 44% from its October peak.
Billionaire investor Ray Dalio cautioned against Bitcoin as a long-term store-of-value and safe-haven asset in early March, stating that gold was much better.
He argued that central banks are not buying BTC, which he said behaves more like a tech stock.
Greg Cipolaro, global head of research at NYDIG, said on March 6 that it appears Bitcoin is “not currently being priced as a macro hedge, a sovereign risk hedge, or a real-rate or inflation trade.”
“That dynamic helps explain the ongoing frustration around Bitcoin’s failure to ‘act like gold’ despite the digital gold label.”
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