In a recent memo, Matt Hougan, the Chief Investment Officer of Bitwise Asset Management, challenged common perceptions about Bitcoin’s price potential, notably the oft-debated possibility of the cryptocurrency reaching $1 million per coin. He argues that much skepticism stems from a fundamental misunderstanding of Bitcoin’s valuation in the context of an expanding global market.
Hougan emphasized that many analysts employ what he terms “static math” when predicting Bitcoin’s future price. This approach overlooks the rapid growth of the global store-of-value market, which he notes has expanded significantly over recent decades. He pointed out that while the idea of Bitcoin reaching $1 million might seem far-fetched—representing a 14-fold increase from its current price—it is essential to consider the factors driving its potential.
In framing Bitcoin as an emerging store-of-value asset that competes directly with traditional safe-haven assets like gold, Hougan proposed a method for estimating Bitcoin’s future value. This involves calculating the total size of the store-of-value market, estimating Bitcoin’s potential share, and dividing by its fixed supply of 21 million coins. Currently, he places the global store-of-value market just under $38 trillion, with gold accounting for roughly $36 trillion and Bitcoin at about $1.4 trillion, which constitutes fewer than 4% of the market.
Hougan argued against a static viewpoint, pointing to the significant growth in gold’s market capitalization over the past 20 years as an indication of how the store-of-value market can evolve during periods characterized by macroeconomic instability. He highlighted that gold’s market value surged from approximately $2.5 trillion in 2004 to nearly $40 trillion today, driven by climbing government debt, geopolitical tensions, and expansive monetary policies.
With an optimistic forecast, Hougan estimated that the global store-of-value market could swell to about $121 trillion within the next decade. For Bitcoin to reach a price of $1 million per coin in this scenario, he suggests it would need to capture around 17% of that burgeoning market—a level he deems attainable considering Bitcoin’s advancements and the trajectory of institutional investment.
Notable progress has been observed recently, especially following the introduction of U.S. spot Bitcoin exchange-traded funds. This has led to increased allocations from institutional investors, with heavyweights like asset managers, endowments, and sovereign wealth funds diversifying their portfolios toward a more substantial share in Bitcoin.
However, Hougan acknowledged that these projections rely on numerous assumptions. He cautioned that the growth of the store-of-value market might not emulate its past pace, and Bitcoin may not gain the expected share. Still, he urged investors to shift focus from current market sizes to how the financial landscape could evolve to better consider Bitcoin’s future potential.
His fundamental argument underscores the critical mistake of applying fixed metrics to assess an asset that operates within a fluid and expanding market landscape. By taking a more dynamic view, Hougan posited that Bitcoin’s path could lead to much higher prices than present. He noted that as of the writing of his memo, Bitcoin was trading around $70,000, suggesting significant room for future growth if his hypotheses play out as anticipated.
