Investors with the right mindset are thinking about digital assets in the distant future, rather than a short-term focus.
Bitcoin falls to 15-month low due to slump in virtual currency market
Bitcoin prices continued their long-term decline, dropping to around $67,000, the lowest level in about 15 months.
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Bitcoin (Cryptocurrency: BTC) It may be down 42% from last October’s record (as of April 11), but investors should not lose sight of the dominant cryptocurrency’s incredible rally. A 10-year return of 17,000% can be difficult to understand.
The focus here is on next 10 years. Below is a discussion of where Bitcoin might be traded in 2036.
Analyzing the story of “digital gold”
Bitcoin is often compared to gold, with the former considered “digital gold.” This story has meaning. Bitcoin is highly scarce because its supply limit is 21 million units. And there is only a certain amount of precious metals on earth, whether above ground or underground. As a result, both of these assets are grouped together as stores of value, with Bitcoin being the emerging asset and gold being the established one.
But any critical thinker will quickly notice. Bitcoin is better than gold On multiple criteria. Gold wins the battle of longevity. However, Bitcoin is more portable, verifiable, and divisible. Can be used in transactions (more on this below).
And because supply doesn’t change based on fluctuations in demand, it becomes even rarer. Approximately 23% of the earth’s gold remains unmined. Less than 5% of Bitcoin remains mined.
I think it’s reasonable to expect that Bitcoin’s market cap, which currently stands at $1.5 trillion, will shave off an estimated $33 trillion of the value of gold (in above-ground reserves) over the next 10 years. Assuming the digital asset reaches half the market capitalization of gold, Bitcoin’s value will increase 11 times in 2036. This would bring its price to around $800,000.
Added benefits as a medium of exchange
In addition to its promise as a new store of value asset, Bitcoin’s market cap and price could receive a further boost from its usefulness as a more widely adopted medium of exchange. This is the ultimate end game, where Bitcoin is seen not as a tool for financial gain, but as something that facilitates everyday commerce. The benefits of this can be huge.
The biggest factor here is that merchants need to start accepting payments in Bitcoin. These companies may consider using cryptocurrencies because they can avoid paying fees to payment processors and secure higher margins. There is no risk of chargebacks and transactions are cleared more quickly.
Fintech company Block is driving this movement. That square segment has just been enabled Accepting Bitcoin payments For millions of merchants. This is a major step towards Bitcoin becoming an established medium of exchange.
If adoption of this use case begins to increase, Bitcoin’s market capitalization will be much larger than the 11x growth seen from the aforementioned “digital gold” argument alone.
Neil Patel has no position in any stocks mentioned. The Motley Fool has a position in and recommends Bitcoin and Block. The Motley Fool has a disclosure policy.
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