While the creation of Bitcoin has spawned an entire industry of cryptocurrencies and blockchains that are used by individuals around the world, this nascent market remains small.
As Mati Greenspan, founder of Quantum Economics and a former eToro senior analyst, recently pointed out, the aggregate market capitalization of all digital assets comes in at $205 billion. While this may seem like a large sum on an individual scale, Greenspan noted that the global stock market is valued at $82.2 trillion in aggregate, some 40,000% higher than cryptocurrencies.
This begs the question: can Bitcoin start to encroach on the market share of stocks? If so, how and why?
Bitcoin to Surge Long-Term?
Bitcoin has already had an amazing past decade, surging by tens of thousands of percent since its “IPO,” so to speak.
Though some say the price appreciation is just starting. Per previous reports from NewsBTC, Wences Casares, the chief executive of Xapo, earlier this year issued an extensive essay titled “The case for a small allocation to Bitcoin.”
In this essay, the long-time Bitcoin adopter, who sits on the board of PayPal and Libra, claimed that while Bitcoin has a 20% chance of failure from his perspective, citing the fact that it remains an experiment, he is more than 50% sure that the cryptocurrency will succeed beyond our wildest dreams. He looks to the fact that BTC has existed for 10 years with (basically) zero interruption/immutability concerns, and that Bitcoin has a rapidly growing user base and an active transactional use case.
Casares adds that if Bitcoin succeeds it may be valued at a drastically higher price than it is now: $1 million apiece, over 140 times higher than current prices.
For some perspective, a $1 million Bitcoin would equate to an $18 trillion market capitalization for BTC alone, still meaning that it would be smaller than global stocks (25%) but still of significant size.
While it isn’t clear on what will decisively drive this growth, there are many theories.
One of the primary theories is that the system surrounding fiat monies will start to collapse in on itself in the coming decades, leading to a process called “hyperbitcoinzation.”
Deutsche Bank, the 17th-largest bank by assets in the world, acknowledged this in a recent research report. Deutsche Bank strategist Jim Reid wrote, according to Bloomberg, that there are potential risk factors in the “current fiat system,” which he called “fragile” before adding that the “could unravel in the 2020s,” that could unravel traditional finance.
Reid claimed that if this takes place, there will be a “backlash against fiat money and demand for alternative currencies, such as gold or crypto could soar.” The Deutsche Bank analyst specifically looked to the high levels inflations of the dollar in the 1970s, which led to a surge in the prices of gold.