$1 million Bitcoin “sounds crazy,” but Bitwise’s CIO says the math has higher points

Matt Hougan believes that Bitcoin only needs 17% of the $121 trillion market to reach $1 million.

According to Matt Hougan, chief investment officer of Bitwise Asset Management, Bitcoin could reach $1 million if it captures about 17% of the $121 trillion global market.

In a recent note, he explained how a long-term market expansion could support much higher prices for the digital asset.

The math behind the goal

Hogan said the idea seemed unrealistic at first because a $1 million valuation would require Bitcoin to grow about 14 times its current price, a goal he himself once rejected in 2018, when BTC was trading around $4,000.

However, after studying the role of assets in financial markets, he said that a common mistake in assessing Bitcoin’s long-term potential is treating the market as a store of value as fixed instead of expanding. Hogan described bitcoin as an emerging digital asset that rivals gold and allows investors to hold wealth outside of traditional fiat currency and banking systems, although he acknowledged that the cryptocurrency remains more volatile and less stable than metal.

According to Exec Bitwise, assessing the potential value of BTC involves calculating the total global market for the store of value, calculating the portion that Bitcoin can capture, and dividing this value by the maximum 21 million units of the asset supply. Based on current numbers, Hugan said the stock market is worth just under $38 trillion, including about $36 trillion in gold and about $1.4 trillion in Bitcoin. This means that BTC currently accounts for just under 4% of this market.

In this context, he said that the price of 1 million BTC seems unrealistic, since the cryptocurrency should occupy more than half of the existing market of the store of value. He described the scenario as “extremely high”. However, the CIO noted that the market itself has grown significantly over time and could continue to expand. He pointed to the growth of the market capitalization of the metal in the last two decades and added that when the first American gold exchange fund started operating in 2004, the global market was worth about 2.5 trillion dollars.

Since then, the value of gold has risen to nearly $40 trillion, representing an annual growth rate of about 13%, fueled by concerns about government debt levels, geopolitical uncertainty, tight monetary policy and other macroeconomic factors. If the broader value stocks market grows at a similar rate, it could reach about $121 trillion over the next decade, Hugan said.

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Under this scenario, Bitcoin would only need to capture about 17% of the market to reach a value of $1 million per BTC. Hougan acknowledged that this still represents significant growth, as BTC’s current share remains around 4%, but said that recent developments show that widespread adoption could make such a change possible.

The main risks

Despite the optimistic outlook, Hugan said there are risks that could prevent the scenario from unfolding. He noted that the stock-of-value market may not continue at the same pace as seen over the past two decades, which included events such as the global financial crisis, widespread adoption of quantitative easing and prolonged periods of low interest rates.

A decline in these trends can also lead to a decline in gold prices. Another possibility is that Bitcoin cannot capture additional market share.

At the same time, Hougan said it is likely that existing forecasts will underestimate the asset’s potential if concerns about rising public debt intensify and investors turn more to alternative stores of value. According to his main scenario, he said that the store of value market will expand, while Bitcoin will gradually increase its share. He added that such a combination could lead to much higher than the current levels.