The dominant cryptocurrency, bitcoin (btc -1.49%), currently represents 51% of the entire crypto market by value, which in turn is worth around $1.65 trillion. Bitcoin dominance has ranged between 40% and 60% market share over the past three years.
Building on that, Cathie Wood's Ark Invest, an asset management firm focused on disruptive technologies like blockchain, believes the cryptocurrency market could be worth $20 trillion by 2030. That implies an increase of around 1,100%. relative to its current level, and implies substantial Bitcoin. Price appreciation.
Specifically, if the overall cryptocurrency market reaches $20 trillion by 2030 and Bitcoin still accounts for between 40% and 60% of that total, then the implied upside for the cryptocurrency falls between 840% and 1,400%.
Before you let go of that estimate, consider the value of other asset classes. The global fixed income market is valued at $130 trillion, the global stock market is valued at $110 trillion, and above-ground gold reserves are valued at $14 trillion. In that context, a $20 trillion cryptocurrency market is plausible.
Bitcoin is in high demand among retail and institutional investors
bitcoin The prices are a product of offer and demand. However, because its source code limits supply to 21 million coins (of which around 19.6 million are currently in circulation), demand is the only important variable. In other words, whether it becomes more or less valuable depends on whether demand increases or decreases. And there is good reason to believe that demand will increase.
Bitcoin is already in higher demand than other digital assets, as evidenced by its dominant position in the cryptocurrency market. Furthermore, although digital wallets PayPal, Blockand Free market allow users to purchase select cryptocurrencies, Bitcoin can only be accessed on the three fintech platforms.
Demand extends beyond retailers. A survey from consulting firm PwC found that institutional exposure to digital assets continued to rise in 2023, just as it did in 2022, and that Bitcoin and Ethereum they remained the most popular digital assets by a wide margin.
Similarly, a recent report by consulting firm Ernst & Young concluded that โthe majority of institutional investors believe in the long-term value of blockchain and crypto/digital assets, and plan to expand investments in digital assets in the next two years.โ or three years." That report also found that Bitcoin (followed by Ethereum) is the most popular digital asset among institutional investors.
The recent approval of spot Bitcoin exchange-traded funds (ETFs) is another sign of growing interest among institutions. Specifically, the European Union approved a spot Bitcoin ETF in 2023, and 11 Bitcoin spot ETFs approved in the US this year.
Bitcoin Spot ETFs Could Drive Demand
Bitcoin spot ETFs purchase the digital currency directly and therefore must closely follow its price. Those products reduce friction by offering exposure to Bitcoin without the hassle of cryptocurrency exchange accounts and blockchain wallets. Investors can effectively buy and sell Bitcoin through existing brokerage accounts by trading Bitcoin ETFs on a spot basis.
Some of the world's largest asset managers now offer spot Bitcoin ETFs, including Black Rock (No. 1 in size), Fidelity (No. 3), Invesco (no. 13), and Franklin Templeton (No. 14). Those big-name companies are especially well positioned to drive demand for Bitcoin given their huge clientele. In fact, together they have more than $15 trillion in assets under management.
Ultimately, spot Bitcoin ETFs could unlock substantial demand from retail and institutional investors. In fact, Fundstrat analyst Tom Lee says Bitcoin could reach $500,000 in 2029, implying an increase of more than 1,000% from its current price of $43,000.
Ark Invest is even more optimistic. Wood and his team propose a base case in which the price per bitcoin will approach $683,000 by 2030, which implies an increase of more than 1,400%.
Bitcoin is a worthwhile investment, but only for certain investors
Cryptocurrencies are less polarizing than before, but volatility, risk and regulatory uncertainty remain characteristics of the market. For that reason, investors with short time horizons (less than five years) and/or aversion to risk and volatility should stay away from cryptocurrencies.
On the other hand, patient investors who are comfortable with risk and volatility should consider keeping a small portion of their portfolios in Bitcoin. But they should temper their expectations.
The colossal returns predicted by Ark Invest and other experts are possible, but far from guaranteed. Bitcoin has fallen 45% or more four times in the last five years, and similar declines are likely in the future.
Trevor Jennewine He has positions in Block, MercadoLibre and PayPal. The Motley Fool has positions and recommends Bitcoin, Block, Ethereum, MercadoLibre and PayPal. The Motley Fool recommends the following options: Short March 2024 calls for $67.50 at PayPal. The Motley Fool has a disclosure policy.
