Million Dollar Bitcoin: Fantasy or a certain reality?

I must have seen the headline declaring that Bitcoin will eventually hit the $1 million dollars mark at least a hundred times in the past 12 months. 

And, that’s crazy when you think about it.

An asset that was worth $7,476 USD on Jan 1st 2020 and now (at time of writing this in late August 2021) is currently valued at just over $48,000 USD going to $1 million dollars in the next 3 - 5 years! Madness, right?

Perhaps, and perhaps not.

This tsunami of headlines got me thinking, is this really possible? Could a $1 million dollar Bitcoin really be something we see or just another cult-like prediction? 

This article is essentially a curation of the research I’ve gathered that would support the potential milestone of a million dollar Bitcoin, and the reasons why it could happen.

I’m not saying it will happen (remember not a financial advisor, I have no accreditations in this and none of this is financial advice - only for education purposes) but I am intrigued to see why our feeds are clogged up by so many people who think we will.

It’s supply is limited

Unlike traditional financial institutes who print more and more money every year, Bitcoin has a fixed supply.

BTC’s circulation is capped at 21 million, which, if you think about it, is tiny considering there are nearly 8 billion people in our world. The full circulating supply of 21 million has yet to be reached but we aren't that far from it.

To add more to this already limited supply, it’s estimated that about 7 million Bitcoins have been lost by owners in a variety of ways over the last decade (you know they feel pain!). 

Which means, we’re looking at only 14 million coins being available to actually own.

This means that BTC is an incredibly scarce asset. And human nature loves nothing more than to own something which is rare and limited to only a certain group. BTC is just this. It’s popularity over the last few years in particular means more than ever, people are wanting a slice of this pie.

And what happens when the demand is higher than the supply? Prices increase.

Kyle Torpey from finance publication The Motley Fool, laid out a potential path for a $1million dollar Bitcoin in his article on the same topic:

“Although there are currently 6.25 new bitcoin issued by miners roughly every ten minutes, the total supply will be capped at 21 million. This means a $1 million bitcoin price would equate to a total supply valuation of $21 trillion (once all coins have been mined, ignoring the millions of coins that have likely been lost forever).

Is that valuation realistic? Let's take a look at some of the markets bitcoin could disrupt as a store of value.

The size of the global bond market was recently estimated at $119 trillion by Securities Industry and Financial Markets Association (SIFMA). At the same time, yields earned on many of those bonds are at or near all-time lows. In fact, $18 trillion worth of those bonds have negative yields. It's not a crazy thought. In the current state of the bond market, Bridgewater Associates Chief Investment Officer Ray Dalio recently said he'd personally rather own bitcoin than bonds.

Let's imagine, for example, that holders of 10% of the global bond market ($11.9 trillion) want to sell their assets for bitcoin. They can't, at least not at current prices, because there's currently less than $1 trillion worth of bitcoin in existence and only a subset of the total bitcoin supply is available for sale at any given price. In other words, bond holders couldn't buy that amount of bitcoin, meaning the price would have to massively increase to absorb the buy orders. It's a simple case of supply and demand.

Or let's imagine a quarter of the gold market moved into bitcoin. That would equate another $3 trillion of buy pressure. Say two percent of the roughly $300 trillion held in the global equities and real estate markets moves into bitcoin, then that's another $6 trillion. You see what I'm saying here. We're looking at $20.9 trillion worth of hypothetical buy pressure from these four markets (bonds, gold, stocks, and real estate). The opportunity for upside is potentially exponential.

Remember, not all coins are for sale, meaning the total value of the bitcoin market would be far greater than $20.9 trillion if all of this money were to move into the crypto asset. Some estimates put the effect of new buy orders on bitcoin's market cap at 25x the value of the purchases, so from this perspective, $1 million looks quite conservative. While this buy pressure certainly isn't likely to happen tomorrow, bitcoin certainly stands to benefit from shaky global markets and uncertainty as an exciting new asset class.”

Its popularity is growing

What was once the unpopular kid at school has now undergone a somewhat dramatic transformation to the coolest thing on the block.

Despite years of leading institutions including banks and hedge funds laughing at BTC and often labelling it a scam. Many are now offering it to their clients as part of their portfolio. Crypto is becoming more mainstream as the days go by and with that, the King of Crypto in BTC is on the minds of more and more investors.

Seana Smith shared the recent hot movements of 2021 from institutions in this break down from Yahoo Finance:

“Earlier in 2021, Tesla invested $1.5 billion in bitcoin, while Morgan Stanley and Goldman Sachs plan to offer select clients exposure to crypto. JPMorgan is also reportedly looking at its own product in partnership with NYDIG.

Crypto is gaining momentum in the payment space as well, with Mastercard, PayPal and Visa increasing crypto exposure over the past several months.

Wall Street’s big banks and payments firms are getting involved in digital assets as a result of client demand. A recent Mastercard survey found that 40% of people plan to use cryptocurrency in the next year.”

And worldwide crypto adoption is on an exponential rise. Recent data from analytics firm Chainanalysis gave us a detailed look into how crypto is being adopted across our little planet.

Fidelity Investments thinks we’ll hit that $1 million milestone sometime in 2027- 2028.

It’s looking to be a front runner in the green energy space

Since a now famous tweet from a certain billionaire, the big B has been getting increased focus on it’s renewable energy usage with everyone and their cat claiming it’s solely responsible for global warming.

The real story beneath all of this is that miners are working more than ever to realise those green energy dreams. With more and more mining companies pushing to make their operations green, this will only make more institutional investors feel more comfortable.

And why? Because a better brand for crypto means more interest and thus more demand for an already incredibly limited supply base.

Plus, in April 2021, the crypto climate accord was created by industry leaders with the purpose of decarbonizing all cryptocurrency mining. Again, another good move for brand BTC and the crypto world overall.

You can see how a few of the world’s leading miners are working on the green energy challenge in the video below.

Conclusion: Can it really get there?

Not a clue! Ha ha, look I’m human just like you and who knows what’s going to happen in this crazy thing we call life.

As I’ve said countless times, I’m not a financial adviser and all of this is for educational purposes - always do your own research. I’m sure we’ll see more development on this potential milestone as the years go on but I hope this piece has given you some interesting information to think over when it comes to this topic.

More from me

Worldwide crypto adoption rises by 888% in 12 months: What this means for the future of finance.

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Important 🚨

I’m not a financial advisor, a psychologist or any from of accredited professional. As such, this is not financial advice and I’m not qualified or licensed to provide anything like this. This content is a bunch of thoughts from a fellow human for educational purposes only — that is all.