We're currently at Bitcoin buy point, $30,000 USD is cheap
Updated
It is my opinion that Bitcoin price will be at least $400,000 USD by 2026. The current price at around $30,000 USD is still cheap as this asset will begin a significant advance.
Here I lay out how I arrived at this conclusion:
Bitcoin works as a store o value, it serves the same function as gold during the Bretton Woods system. Gold was an excellent store of value due to its high stock to flow ratio (the relation between annual production and the total available supply). As gold is a very scarce metal, the amount of gold mined every year is very low compared with the current stock. Scarcity is key for storing value. As the supply of bitcoin is limited to 21 million (we will arrive to that amount at the year 2140) and it's increasingly harder to mine (by design), this is a perfect store of value.
So what many people has come to expect is that Bitcoin will eventually replace gold as the de facto store of value for individuals, institutions and even central banks. This year, according to what I've been reading, many people has been selling their gold ETFs and buying Bitcoin (I did that), and major investors and corporations started moving their treasury or at leas part of it to Bitcoin. Also investment funds and family offices are using Bitcoin as a hedge, the same way they used gold before.
Now, assuming Bitcoin will replace gold, we can use the total market cap of gold to calculate the price of Bitcoin. According to my research gold's market cap is between 7 and 9 trillion dollars (sources differ). I will take the 9 trillion figure because I'm guessing there is a lot of gold unaccounted for (jewelry, dentists and technology companies gold inventory, as well as gold coins and bars held by individuals) and also more gold will be mined in the following years between now and when Bitcoin is effectively the de facto store of value.
So if we divide 9 trillion (total gold market cap) between 21 million (maximum supply of bitcoin) we arrive at a price of $428,571.43 USD per Bitcoin. We can round it to $400,000 if you may. Now, keep into account that this price may be a worst-case scenario, because (1) as time progress more wealth is generated, (2) Bitcoin has a higher stock to flow ratio than gold and (3) probably will be even scarcer that 21 million because there are a lot of lost tokens (some estimate that around 3 million). Also (4) remember we wont arrive at 21 million before the year 2140.
Taking all this into account it is my opinion that the price of Bitcoin should be at least $400,000 by the time it becomes the commonly used store of value. Now the question is when will we arrive at this? I think this economic change is moving faster than it would normally take. Consider that is estimated that by 2025 the majority of buying power will be held by Millenials. I don't have math to support this but following the pulse of the market I can only guess we will arrive at this price in the next 5 years, so let's say by 2026.
Remember this is all speculation, before making any financial decisions take time to study everything you can about this and consult with professionals.
Here I lay out how I arrived at this conclusion:
Bitcoin works as a store o value, it serves the same function as gold during the Bretton Woods system. Gold was an excellent store of value due to its high stock to flow ratio (the relation between annual production and the total available supply). As gold is a very scarce metal, the amount of gold mined every year is very low compared with the current stock. Scarcity is key for storing value. As the supply of bitcoin is limited to 21 million (we will arrive to that amount at the year 2140) and it's increasingly harder to mine (by design), this is a perfect store of value.
So what many people has come to expect is that Bitcoin will eventually replace gold as the de facto store of value for individuals, institutions and even central banks. This year, according to what I've been reading, many people has been selling their gold ETFs and buying Bitcoin (I did that), and major investors and corporations started moving their treasury or at leas part of it to Bitcoin. Also investment funds and family offices are using Bitcoin as a hedge, the same way they used gold before.
Now, assuming Bitcoin will replace gold, we can use the total market cap of gold to calculate the price of Bitcoin. According to my research gold's market cap is between 7 and 9 trillion dollars (sources differ). I will take the 9 trillion figure because I'm guessing there is a lot of gold unaccounted for (jewelry, dentists and technology companies gold inventory, as well as gold coins and bars held by individuals) and also more gold will be mined in the following years between now and when Bitcoin is effectively the de facto store of value.
So if we divide 9 trillion (total gold market cap) between 21 million (maximum supply of bitcoin) we arrive at a price of $428,571.43 USD per Bitcoin. We can round it to $400,000 if you may. Now, keep into account that this price may be a worst-case scenario, because (1) as time progress more wealth is generated, (2) Bitcoin has a higher stock to flow ratio than gold and (3) probably will be even scarcer that 21 million because there are a lot of lost tokens (some estimate that around 3 million). Also (4) remember we wont arrive at 21 million before the year 2140.
Taking all this into account it is my opinion that the price of Bitcoin should be at least $400,000 by the time it becomes the commonly used store of value. Now the question is when will we arrive at this? I think this economic change is moving faster than it would normally take. Consider that is estimated that by 2025 the majority of buying power will be held by Millenials. I don't have math to support this but following the pulse of the market I can only guess we will arrive at this price in the next 5 years, so let's say by 2026.
Remember this is all speculation, before making any financial decisions take time to study everything you can about this and consult with professionals.
Comment
JPMorgan Says Gold Will Suffer for Years Because of Bitcoin: bnnbloomberg.ca/jpmorgan-says-gold-will-suffer-for-years-because-of-bitcoin-1.1533933
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