While Bitcoin’s invention has spawned an entire industry of cryptocurrencies and blockchains, this emerging market remains small.
As Mato Greenspan, founder of Quantum Economics and former senior analyst at eToro, recently pointed out, the total market capitalization of all digital assets is $ 205 billion. On an individual level, this may seem like a big sum. But Greenspan points out that the global stock market is valued at $ 82.2 trillion in aggregate – about 40,000% more than crypto currencies.
This begs the question: Can Bitcoin capture market share from shares? If so, how and why?
Bitcoin should grow in the long term?
Bitcoin has had an amazing decade and has risen tens of thousands of percent since the IPO.
And some even say that the price increase is just beginning. Earlier this year, Wenzes Casares, Chief Executive Officer of Xapo, published a voluminous paper entitled “The case for a small allocation to Bitcoin”.
In this essay, the longtime Bitcoin user, who sits on the board of PayPal and Libra, claims that although Bitcoin has a default probability of 20% and is still an experiment. However, he is more than 50% sure that the cryptocurrency will succeed “beyond our wildest dreams.”
He points to the fact that BTC has existed for ten years, that there are (basically) no interruption / convertibility issues – and that Bitcoin has a rapidly growing user base with an active transactional use case.
Casares adds that Bitcoin, if successful, can be valued at a drastically higher price than today: $ 1 million apiece, more than 140 times higher than current prices.
For the time being, a “$ 1 million bitcoin” would equal a $ 18 trillion market capitalization for BTC alone – smaller than global equities (25%), but still of significant size.
While it is not clear what will drive this growth, there are many theories.
One of the most important is that the system will collapse over Fiat money in the coming decades, resulting in a process called “hyperbitcoincation”.
Deutsche Bank, the 17th largest bank in the world after assets, has confirmed this in a recent research report. According to Bloomberg, Deutsche Bank strategist Jim Reid writes that there are potential risk factors in the “current Fiat system” that he calls “fragile”. This could “dissolve” in the 2020s.
Reid claims that if that happens, there will be a “backlash against paper money and the demand for alternative currencies, like gold or crypto, could go up.” The analyst of the Deutsche Bank looks particularly at the high appreciation of the dollar in the 1970s, which led to an increase in gold prices.