In November of 2020, we posted an article that looked at whether Bitcoin was poised to push past the $20,000 barrier. Entitled, “Will Bitcoin Go Over $20K to Reach a New ATH,” that article is worth exploring again several months later as we look to gain some perspective on where things now stand not just with Bitcoin, but in the broader crypto market.
In that article, we proposed that Bitcoin’s value proposition is based on the following:
- Store of Value
- Intermediary of Exchange (to act as a currency)
- Source of Dependable Liquidity
- Limited Domicile Risk / Stable Legal Framework, Rules
- Technology Platform
- Expression of Public Consensus
Since November of last year, consensus has solidified on the first and last points: Bitcoin is the universal store of value. While there are still banks refusing to acknowledge Bitcoin’s rise, the list continues to grow of those who see the future of finance: Goldman Sachs, Bank of New York Mellon, USAA, and JP Morgan. Corporate treasuries, inspired by Michael Saylor’s MicroStrategy, are now turning to Bitcoin, as companies like Tesla and Square have made material purchases of Bitcoin.
With institutional money coming into the Bitcoin market, the entire crypto space is being buoyed. By market cap, Ethereum is still the number two currency, and over the past year, it is up 1185% against the dollar. Though Ethereum’s annualized returns look good, high fees have caused it to be stuck in neutral of late and competitors like Polkadot and Cardano have seized the opportunity and have begun to grab considerable market share.
What is perhaps the most notable thing to have changed since that November article is that Bitcoin is almost becoming “boring,” albeit boring in the sort of way that is quite positive in terms of its future prospects. Its network is secure. People are becoming more and more familiar with it. Its market is quite liquid. In other words, it is becoming the tried and true financial instrument of the crypto ecosystem, with sectors like decentralized finance or “DeFi” emerging as the new trend, only to be supplanted by Non-Fungible Tokens or “NFT’s.”
At this point, it might be more interesting to ask the question: “What Could Send Bitcoin to Zero?” There was a point not so long ago when that was a viable question. We would assert that it is no longer worth asking because Bitcoin has reached the point where network effects and consensus have allowed it to emerge as a store of value that exists within a truly free, truly global market. We now postulate that going to zero is nearly impossible.
If zero is out, how high could Bitcoin go? Bitcoin is poised to capture a large chunk of global wealth. For those looking to protect their savings from inflation or confiscation, Bitcoin provides an alternative to fiat savings, precious metals, as well as property and other real assets. With total world wealth estimated at $360 trillion, and Bitcoin’s current market cap at $1.1 trillion, the sky’s the limit.
