The total value of all cryptocurrencies in circulation is currently at $3.5 trillion, which is close to an all-time high. Bitcoin(CRYPTO: BTC) accounts for more than half of that value, thanks to its market cap of nearly $2 trillion.
Bitcoin has become a popular store of value for investors due to its decentralized nature, limited supply and secure system called blockchain. But Michael Saylor, who co-founded the software company Micro strategybelieves it has the potential to remake the global financial system.
As a result, Saylor predicts that Bitcoin could rise to $13 million per coin by the year 2045, which would translate into an eye-popping 13,031% gain for investors buying it at the current price of around $99,000. But how realistic is that goal?
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Last year USA Securities and Exchange Commission (SEC) approved dozens of Bitcoin exchange-traded funds (ETFs), which provided individual and institutional investors with a safe, regulated way to own the cryptocurrency. It helped legitimize the view that Bitcoin is a real store of value, kind of like a digital version of gold.
Saylor believes that Bitcoin is much more than that. He foresees a future in which real assets worth more than $500 trillion are “tokenized,” meaning that their ownership rights (among other things) are moved to the blockchain, replacing current systems of record. The $500 trillion figure basically represents the value of every asset in the world – from every piece of real estate to every share in every company.
Since Bitcoin is truly decentralized and cannot be controlled or manipulated by any person or company, Saylor believes it is the perfect reserve asset for the tokenization process. It would be the currency people use when they buy, sell or transfer tokenized assets, which basically means that everyone needs to own some Bitcoin to participate in this new financial system.
Saylor believes all of this could happen by the year 2045, sending Bitcoin from its current price of around $99,000 (at the time of writing) to $13 million. The first step is to create a framework for digital assets (a system of rules and laws) under which he believes this can happen Trump’s administration. The incoming president is pro-crypto, and since his party now controls all three branches of government, this could provide an opportunity to jumpstart the massive project.
Mathematically, a price-per-Bitcoin of $13 million would give the cryptocurrency a market cap of around $257 trillion (based on Bitcoin’s current supply of 19.8 million coins). The total market value of all 500 companies in S&P 500(SNPINDEX: ^GSPC) index now is $49.1 trillion, so Bitcoin would be worth five times more than that.
It doesn’t sound realistic, and it’s based on the assumption that every single government, company, and person in every country in the world will agree to operate under a new Bitcoin-based financial system. If you follow politics even a little, you probably know how difficult it is for people to agree on even the most basic points. I wouldn’t bet on an overhaul of the entire global financial system – at least not in the next 20 years.
Also, fiat currencies with floating exchange rates are advantageous because not all economies operate at the same speed. Consider an economic shock like Brexit, for example. When the British people voted to leave the EU in 2016, the value of their domestic currency (the British pound) fell by around 20% against most other major currencies such as the US dollar. It helped absorb some of the economic fallout by making British exports cheaper for global buyers.
While Saylor’s vision does not involve abandoning fiat currencies, any kind of Bitcoin standard would severely disadvantage the weaker economies of the world. They would have to shell out more money to buy a single Bitcoin than countries with a strong economy (and a strong domestic currency) like the US, and it’s unclear how that problem will be solved.
Earlier I said that many investors consider Bitcoin a good store of value, especially now that ETFs are widely available. Since gold has been the standard when it comes to storing value for thousands of years, it might offer some insight into where Bitcoin could go from here.
The total value of all gold reserves is $18.1 trillion. Bitcoin’s market cap would need to increase by 823% to match that, which equates to a price of $914,000. There’s no guarantee it will get there anytime soon (or ever), but it’s a much more realistic goal than Saylor’s.
After all, don’t forget that Saylor’s company, MicroStrategy, owns 450,000 Bitcoins, so he has a vested interest in presenting highly bullish forecasts.
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Anthony DiPizio has no position in any of the shares mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has one disclosure policy.
