Bitwise chief investment officer Matt Hougan says Bitcoin needs to make up just one-sixth of the global “store of value” market currently dominated by gold to reach $1 million per coin.
In a blog post on Tuesday, Hougan said that most would dismiss the bullish prediction for Bitcoin because it would need 50% of the market value of gold to eclipse Bitcoin.
However, Hougan said the “mistake” most people make is to ignore the rise of gold and the broader “store of value” market.
Gold market capitalization has risen about 13% annually since 2004, from $2.5 trillion to about $38 trillion, due to “increasing concerns about sovereign debt, geopolitical uncertainty, easy monetary policy and other factors.”
“If this growth rate continues, the global ‘store of value’ market will be (roughly) $121 trillion in 10 years. At this level, Bitcoin only needs to capture 17% of the market to be worth $1 million per coin.”
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Hougan cited the rise of institutional investment, such as exchange-traded funds, sovereign wealth funds, and increased portfolio allocation as potential catalysts.
“There are still miles to go, but with these undercurrents, capturing a sixth of the value stocks market in 10 years doesn’t seem too far-fetched,” he said, adding:
“As I see it, the main argument – that the store of value market will continue to grow and that Bitcoin will continue to have the market share that it has – will lead you to much higher prices than today.”
The difference between Bitcoin and gold deepens
Hougan’s million dollar Bitcoin (BTC) thesis depends on the asset continuing to converge with gold; However, the last few months have shown that Bitcoin is not moving with gold.
Gold hit a record high of $5,327 an ounce in late January and is only 2.2% off today, while Bitcoin is currently down 44% from its October peak.
Billionaire investor Ray Dalio warned against Bitcoin as a long-term safe-haven asset in early March, arguing that gold is far better.
He argued that central banks are not buying BTC, which he says is more like a technology stock.
Greg Cipolaro, global head of research at NYDIG, said on March 6 that it appears that Bitcoin “is not currently being priced as a macro hedge, an independent risk hedge, or a real trade or inflation.”
“This dynamic helps offset the continued frustration about Bitcoin’s failure to ‘act like gold’ despite the digital gold label.”
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