Author: Matt Hougan , Chief Investment Officer, Bitwise

Compiled by: Saoirse, Foresight News

A few days ago, a financial advisor asked me, "Matt, do you really think one Bitcoin is worth a million dollars? That number is insane."

I understand his thinking. $1 million does sound outrageous. That means Bitcoin would have to rise 14 times from its current price.

When I entered the crypto industry full-time in 2018, I would have laughed at such talk. At the time, Bitcoin was around $4,000, and a $1 million target—even to me—seemed utterly absurd.

But I don't think so anymore. The more I researched this asset, the more I realized that I, like my financial advisor friend, made a very fundamental mistake in analyzing Bitcoin's potential.

In this week's memo, I want to explain this error and show how a rather conservative set of assumptions leads to the conclusion that Bitcoin could reach $1 million.

How to estimate the value of Bitcoin

I view Bitcoin as an emerging store of value. It functions similarly to gold—allowing people to hold wealth outside of traditional fiat currencies and the banking system, only in digital form. It is more volatile and has a shorter history than gold, but it is competing with gold for the same market.

Within this framework, the basic logic for estimating its value is quite simple:

Estimate the total size of the value storage market;
Estimate the market share that Bitcoin can capture;
Divide by 21 million (the maximum total supply of Bitcoin).

That way you can get its implied price.

Today, the value storage market is close to $38 trillion:

Gold: $36 trillion
Bitcoin: $1.4 trillion

According to this calculation, Bitcoin currently accounts for less than 4% of the market share.

This is why many people think "Bitcoin worth $1 million" is unrealistic, and it's also why I haven't believed it for years.

Given the current market size, Bitcoin would need to capture more than 50% of the value storage market to reach $1 million, making the threshold extremely high.

But a crucial point most people overlook is that the market for storing value is not static. In fact, it has expanded dramatically over the past 20 years. And as concerns about fiat currency devaluation spread, I believe this expansion will continue.

A Brief History of Gold

My first real interest in gold was in 2004 when the first gold ETF was launched in the United States. At that time, the entire gold market was worth about $2.5 trillion—not much larger than the Bitcoin market is now.

Over the years, it has grown to nearly $40 trillion, with a compound annual growth rate of 13%. The underlying reason is the rising concerns about issues such as government debt, geopolitical risks, and loose monetary policy.

Gold market value, from 2004 to present

Source: Bitwise Asset Management, data from the World Gold Council and Bloomberg.

The mistake people make when assessing Bitcoin's potential is ignoring this growth.

If this growth rate continues, the global "store of value" market will reach approximately $121 trillion in 10 years. At this size, Bitcoin would only need to capture 17% of the market for one coin to reach $1 million.

A rise from 4% to 17% is still a huge increase, but considering Bitcoin's progress in recent years, this goal is entirely within reach.

A few years ago, there were no Bitcoin ETFs in the United States, institutional holders were few and far between, and Bitcoin was so volatile that almost no one was willing to allocate more than 1%.

Now:

Bitcoin ETF becomes the fastest-growing ETF in history;
From Harvard's endowment fund to Abu Dhabi's sovereign wealth fund, various institutions hold shares;
Bitcoin's long-term volatility has decreased, and many professional investors are beginning to consider a 5% allocation.

The road ahead is long, but given these trends, capturing one-sixth of the value storage market within 10 years is not extreme; it's more like a natural continuation of existing trends.

Potential risks

Of course, we must consider both sides of the issue comprehensively.

The global market for storing value may not continue to grow as it has in the past 20 years. The past 20 years have seen global financial crises, quantitative easing, and prolonged low interest rates; these conditions may not be repeated in the future, and gold prices may decline.

Another risk is that Bitcoin may not be able to expand its market share.

However, I believe these predictions may also be conservative: as concerns about government debt reach crisis levels, the value store market may grow even faster in the future, and Bitcoin's final share in 10 years may be far higher than 17%.

In my opinion, the baseline scenario is:

The value storage market continues to expand as it has in the past;
Bitcoin continues to increase its market share as it does now.

This would push the price of Bitcoin to levels far higher than today.

Notes

(1) Long-time readers may recall that I wrote on a similar topic in 2023. Since then, my views have become clearer.

(2) It is worth mentioning that if silver, platinum and palladium are also included, the value storage market will be larger, but for the sake of comparison, this article only compares gold and Bitcoin.

数据：除Ark 21Shares的ETF外，美国比特币现货ETF昨日资金净流入约8480万美元

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