I’ve said before that bitcoin could hit US$100,000 faster than anyone realizes.
But some people think that number’s conservative.
Wences Casares, a Paypal director and the CEO of bitcoin wallet and storage company Xapo, believes bitcoin could hit US$1 million in seven to 10 years.
That might sound insane.
But here’s how it could happen…
How bitcoin could hit US$1 million
Growing up in Argentina, Casares saw his family lose their life savings three times – through a large devaluation of the national currency, hyperinflation and the government confiscating all bank deposits.
“My memory of these events is not economic or financial but very emotional,” he says. “I remember my parents fighting about money, I remember being scared, I remember everybody around us being scared and returning to desperate, almost animal-like behavior.”
Bitcoin solves the problem that led to those crises. Bitcoin can’t be devalued. It can’t be hyperinflated. And it can’t be stolen by the government.
With those characteristics, bitcoin could become a global store of value and the primary way of settling international transactions. If that happens, bitcoin’s eventual value could land somewhere between gold’s US$7 trillion market cap and the US$40 trillion that all the currency in the world is worth.
To get to a specific forecast for the total value of all bitcoin, Casares uses a simple formula:
US$7,000 x the total number of people who own bitcoin
Why US$7,000? Because that’s the historical average for bitcoin’s market cap over time (US$7,000 x the total number of bitcoin owners). In other words, every new bitcoin buyer invests an average of US$7,000. Some invest a lot more, some invest a lot less.
That means if 3 billion people ever own bitcoin, its market cap could be around US$21 trillion (~US$7,000 x 3 billion) or US$1 million per bitcoin.
US$21 trillion is an enormous number.
It’s slightly more than the U.S. gross domestic product (GDP)… the total value of all the goods and services produced in the U.S. in a year.
But we’ve already seen an asset class hit more than 100 percent of U.S. GDP. During the dot-com bubble during the late 1990s and early 2000s, tech stocks were, at their peak, worth 101 percent of U.S. GDP.
Bitcoin could get there too… assuming Casares’ formula holds true and bitcoin keeps adding more users at a feverish pace.
Bitcoin is about to get a lot bigger
More than 60 million people around the world have invested in bitcoin. That number grows by about 1 million every month, according to Casares. And already, bitcoin moves US$1 billion around the world every day.
But bitcoin is about to get a lot bigger.
Bloomberg recently reported that online trading company E*Trade Financial Group will soon launch trading for the top two largest cryptos, bitcoin and Ethereum. That means E*Trade’s nearly 5 million existing clients will have the ability to buy and sell cryptos.
Trading firm TDAmeritrade is allegedly preparing to do the same. TDAmeritrade has 11 million users.
Fidelity, one of the world’s largest financial services and investment firms, also said last month it would launch crypto trading “within a few weeks.” The company has US$6.7 trillion in customer funds and has nearly 30 million customers.
Add them all together, and 41 million investors could soon have a simple way to buy bitcoin.
Those are huge numbers considering just 24 million Americans (about 9 percent of the adult population) are believed to own some bitcoin. That means bitcoin’s potential investor base will grow sharply overnight.
The operators of the New York Stock Exchange (NYSE) will soon launch a crypto exchange called Bakkt too. That will make trading crypto as easy as buying shares of Apple.
So we’re standing on the cusp of the biggest leap forward in access to crypto since bitcoin launched more than a decade ago.
That access could mean we’ll see tens of millions of new bitcoin buyers this year. With bitcoin’s fixed supply, new users can only mean one thing: higher bitcoin prices. If millions of new buyers turn into billions, Casares’ prediction might not be so insane after all.
The biggest risk now isn’t buying bitcoin… it’s standing on the sidelines. Take a small position in bitcoin and forget about it. You’ll likely be glad you did.
Cryptocurrency Analyst, Stansberry Pacific Research