With bitcoin (CRYPT: BTC) With the price skyrocketing, analysts and traders are now increasing their predictions on how much further this cryptocurrency could go. While some of these predictions sound like unrealizable wishful thinking (such as claims that bitcoin Its value will skyrocket to $1 million in a matter of weeks; In fact, there are some predictions that are much more based in reality.
Take, for example, Fidelity Investments' recent prediction that Bitcoin could soon gain another $500 billion in market cap. Given Bitcoin's recent price of $50,000 and a market cap of $1 trillion, that would imply that Bitcoin could soon skyrocket in value to $75,000 and a market cap of $1.5 trillion. That would be enough to push Bitcoin past its all-time high of $69,000. So is Fidelity right?
Bitcoin as digital gold
Fidelity Investments' valuation forecast is based primarily on a single observation: Bitcoin is increasingly replacing gold as a store of value and inflation hedge for many investors. This makes sense on some level, given that Bitcoin has long been referred to as โdigital gold.โ As a result, analysts have often used the size of thegold marketas a framework for how valuable Bitcoin could become in the future.
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Of course, it's hard to imagine a future where Bitcoin replaces gold entirely, but Fidelity now believes Bitcoin could account for 25% of monetary value.gold market which is defined as gold held by central banks, large financial institutions and governments. Simply put, instead of buying gold as a hedge against future economic uncertainty, these institutions will soon be buying Bitcoin. Since the size of moneygold marketis approximately $6 trillion, that change in strategy could drive a huge amount of new Bitcoin purchases.
How realistic is the 25% figure?
At first glance, the 25% figure seems far-fetched. It's hard to imagine Federal Reserve chief Jerome Powell arguing the merits of Bitcoin over gold, or major Wall Street institutions betting on Bitcoin as a store of value. But he might be surprised by what the current numbers tell us.
For example, if you accept the argument that Bitcoin is "digital gold", all you have to do is compare the current valuation of Bitcoin with the valuation of the currency rate.gold market This will give you a rough idea of โโBitcoin's current market share. And guess what? Bitcoin's current valuation of $1.2 trillion is almost exactly 20% of the $6 trillion monetary gold figure used by Fidelity. So increasing that figure from 20% to 25% doesn't seem so far-fetched.
Additionally, when you compare Fidelity's assumptions to those used by other Wall Street institutions, they actually seem a bit conservative. In 2022, for example, Goldman Sachs predicted that Bitcoin would eventually account for 50% of monetary valuegold market giving Bitcoin a nice round price of $100,000. And in its 2023 "Big Ideas" report, Ark Invest used a 20% market share in its bearish scenario, 40% in its base case, and 50% in its bullish scenario.
Is Bitcoin more than just digital gold?
In fact, the more you play with the numbers, the higher Bitcoin's true valuation will appear to be. Note that the idea that Bitcoin could gain another $500 billion in market cap is largely based on the โdigital goldโ argument. It does not take into account the new Bitcoin Spot ETF inflows or the upcoming Bitcoin halving. And it doesn't take into account Bitcoin's growing role in the global economy. Once all of these factors are added up, Bitcoin's future valuation appears almost limitless.
But just a warning: it's easy to fall into the trap of thinking that Bitcoin is worth more than it really is. For example, during the last crypto market bull cycle, Fidelity Investments predicted that a single Bitcoin would be worth $1 billion by the year 2038. So be careful what numbers and assumptions you use.
That said, it's hard not to be bullish on Bitcoin right now. Now that major Wall Street institutions are backing Bitcoin and creating new investment products for it, the future potential of this cryptocurrency appears to be through the roof.
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Dominic Basulto has positions in Bitcoin. The Motley Fool holds and recommends Bitcoin and Goldman Sachs Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
