Bitcoin to 1 million by June? What is needed?
Updated
Have you heard about former Coinbase CTO Balaji Srinivasan's ludicrous bet that Bitcoin will reach 1 million by June due to the banking crisis? That's almost as crazy as late John McAfee's (RIP) bet back in the days.
But let's get to the real question, how much "money" would it take for Bitcoin to reach such a valuation? Hmm...a pop quiz seems fun!
How much money inflow is needed for Bitcoin to reach a 1 million USD valuation?
a) 5 trillion USD
b) 10 trillion USD
c) 20 trillion USD
d) nothing, hyperinflation will do the trick
e) it's not possible, Bitcoin won't reach a million
Put your answer in the comments right now, then come back and read on ... The answer might surprise you.
Okay, ready? Let's dig in...
Many folks might think that for Bitcoin to reach a 1M USD valuation, it's as simple as checking the current market cap and subtracting that from the total number of Bitcoins issued multiplied by 1 million. That would mean roughly 19,325,000 x 1,000,000 - 550,000,000,000 = 18,775,000,000 or 18.75T USD.
But hold your horses! There are a couple of things to keep in mind. Approximately 80% of all issued bitcoins are being HODLed right now, meaning they are illiquid, the most significant number ever. This means that only 20% of 19,325,000 BTC or approximately 3,865,000 BTC is liquid and available for purchase. The actual number of BTC available on exchanges is even lower.
Then there's the multiplier effect, averaging around 2.6 in the last 5 years. This effect means that for every $1 invested in Bitcoin, the market cap increased on average by $2.6, a fascinating side-effect of the supply and demand mechanism.
Now let's calculate buying those liquid Bitcoins, keeping in mind the multiplier effect using the following formula.
Inflow needed = liquid supply x 1,000,000 / 2.6
Calculated ► 3,865,000 x 1,000,000 / 2.6 = 1,486,538,461,538 USD or roughly 1.5 T.
Quite a difference compared to 18.75T, right?
This calculation, of course, is purely hypothetical and assumes that the current level of demand and supply remains constant. The actual price of bitcoin may vary due to a number of factors, such as changes in demand, supply, and market sentiment. Factors that could have a big impact:
Nevertheless, the calculation above proves that less money is needed than previously thought for BTC to reach a 1M valuation. While I don't believe that we'll see that happening by June and this bet is outrageously bold, it does show that there is a possibility that if the banking issues continue and people see Bitcoin as a safe haven, we could reach a 1M Bitcoin faster than expected, with less inflow than expected. The point is that the faster this would happen, the less inflow would be needed.
So there you have it! While Balaji Srinivasan's bet may seem outrageous and implausible, it's not as far-fetched as it might appear initially. With the right set of environmental circumstances, such as continued banking crises and increased adoption of Bitcoin as a safe haven asset, reaching a 1M valuation may be closer than we think. And now you know the (theoretical) calculation for how much money it would take to get there!
What do you think? Does his bet make sense? If not, what is your prediction?
Leave your thoughts in the comments and if you liked what you read here, pressing the little rocket (it really helps!) would be appreciated!
Oh, and while you're here, why don't you check the idea below as well, an actual analysis of what I personally expect to happen till the next halving. (And no, it's not as crazy as this bet). Enjoy!
But let's get to the real question, how much "money" would it take for Bitcoin to reach such a valuation? Hmm...a pop quiz seems fun!
How much money inflow is needed for Bitcoin to reach a 1 million USD valuation?
a) 5 trillion USD
b) 10 trillion USD
c) 20 trillion USD
d) nothing, hyperinflation will do the trick
e) it's not possible, Bitcoin won't reach a million
Put your answer in the comments right now, then come back and read on ... The answer might surprise you.
Okay, ready? Let's dig in...
Many folks might think that for Bitcoin to reach a 1M USD valuation, it's as simple as checking the current market cap and subtracting that from the total number of Bitcoins issued multiplied by 1 million. That would mean roughly 19,325,000 x 1,000,000 - 550,000,000,000 = 18,775,000,000 or 18.75T USD.
But hold your horses! There are a couple of things to keep in mind. Approximately 80% of all issued bitcoins are being HODLed right now, meaning they are illiquid, the most significant number ever. This means that only 20% of 19,325,000 BTC or approximately 3,865,000 BTC is liquid and available for purchase. The actual number of BTC available on exchanges is even lower.
Then there's the multiplier effect, averaging around 2.6 in the last 5 years. This effect means that for every $1 invested in Bitcoin, the market cap increased on average by $2.6, a fascinating side-effect of the supply and demand mechanism.
Now let's calculate buying those liquid Bitcoins, keeping in mind the multiplier effect using the following formula.
Inflow needed = liquid supply x 1,000,000 / 2.6
Calculated ► 3,865,000 x 1,000,000 / 2.6 = 1,486,538,461,538 USD or roughly 1.5 T.
Quite a difference compared to 18.75T, right?
This calculation, of course, is purely hypothetical and assumes that the current level of demand and supply remains constant. The actual price of bitcoin may vary due to a number of factors, such as changes in demand, supply, and market sentiment. Factors that could have a big impact:
- Large market orders would increase the multiplication factor as it pumps up the price much faster
- Certainly, some sell orders would be triggered at certain prices along the way, which increases the number of liquid BTC and thus the amount needed to pump to 1M
- The calculation did not keep in mind the BTC that will be mined till June, so we need to add some additional BTC in our calculations.
- Maybe most importantly, sell orders have the same multiplier effect, not to mention the panic selling that could occur if a large amount of BTC was sold at once.
Nevertheless, the calculation above proves that less money is needed than previously thought for BTC to reach a 1M valuation. While I don't believe that we'll see that happening by June and this bet is outrageously bold, it does show that there is a possibility that if the banking issues continue and people see Bitcoin as a safe haven, we could reach a 1M Bitcoin faster than expected, with less inflow than expected. The point is that the faster this would happen, the less inflow would be needed.
So there you have it! While Balaji Srinivasan's bet may seem outrageous and implausible, it's not as far-fetched as it might appear initially. With the right set of environmental circumstances, such as continued banking crises and increased adoption of Bitcoin as a safe haven asset, reaching a 1M valuation may be closer than we think. And now you know the (theoretical) calculation for how much money it would take to get there!
What do you think? Does his bet make sense? If not, what is your prediction?
Leave your thoughts in the comments and if you liked what you read here, pressing the little rocket (it really helps!) would be appreciated!
Oh, and while you're here, why don't you check the idea below as well, an actual analysis of what I personally expect to happen till the next halving. (And no, it's not as crazy as this bet). Enjoy!
Note
The big question here of course is, even if it would happen and Bitcoin would become 1 Million USD by June, what would the actual value of USD be at that time?Note
5 days to go :)I think it's fair to say that Coinbase CTO Balaji Srinivasan's prediction is not going to happen. But hey, it was good fun to try and figure out what would be needed to get BTC up to that price. :)
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