and Bitcoin (Cryptocurrency: BTC) With prices soaring, analysts and traders are now ratcheting up their predictions on how much this cryptocurrency will rise. While some of these predictions sound like pure wishful thinking, such as the claim that Bitcoin's value will skyrocket to $1 million in a few weeks, they are actually more reality-based predictions. There are also some.
For example, consider Fidelity Investments' recent prediction that Bitcoin's market cap could soon increase by an additional $500 billion. Given Bitcoin's recent price of $50,000 and market cap of $1 trillion, this means Bitcoin's value will soon skyrocket to $75,000 and market cap of $1.5 trillion. It means there is a possibility. This would be enough to push Bitcoin past its all-time high of $69,000. So is Fidelity right?
Bitcoin as digital gold
Fidelity Investments' valuation forecast is primarily based on a single observation: Bitcoin is increasingly replacing gold as a store of value and inflation protection for many investors. On one level, this makes sense, given that Bitcoin has long been referred to as “digital gold.” As a result, analysts have often used the size of the gold market as a criterion for determining how much Bitcoin will be worth in the future.
Of course, it's hard to imagine a future where Bitcoin fully replaces gold, but Fidelity estimates that Bitcoin currently accounts for 25% of the gold coin market (defined as gold held by central banks, large financial institutions, and governments). I think there is a possibility that . Simply put, instead of buying gold as a hedge against future economic uncertainty, these institutions will soon be buying Bitcoin. Given that the size of the gold monetary market is approximately $6 trillion, this change in strategy could prompt new large purchases of Bitcoin.
How realistic is 25%?
On the surface, 25% sounds far-fetched. Imagine Federal Reserve Director Jerome Powell touting the benefits of Bitcoin over gold, or Wall Street giants going all-in on Bitcoin as a store of value. is difficult. But you might be surprised by what the current numbers tell us.
For example, if you agree with the argument that Bitcoin is “digital gold,” all you have to do is compare Bitcoin's current valuation to that of the monetary gold market. This will give you an approximate idea of Bitcoin's current market share. And guess what? Bitcoin's current valuation of $1.2 trillion is nearly 20% of the $6 trillion monetary value of gold used by Fidelity. So increasing this 20% figure to 25% is not that unlikely.
Additionally, when you stress test Fidelity's assumptions compared to those used by other institutions on Wall Street, they actually appear to be a bit conservative. For example, in 2022, goldman sachs He predicted that Bitcoin would eventually capture 50% of the gold market, with an approximate price of $100,000. And Ark Investments used a market share of 20% in the bearish scenario, 40% in the base scenario, and 50% in the bullish scenario in its 2023 “Big Ideas” report.
Is Bitcoin more than just digital gold?
In fact, the more you play with the numbers, the higher Bitcoin's true valuation will appear. Keep in mind that the idea that Bitcoin could gain another $500 billion in market cap is largely based on the “digital gold” argument. This does not take into account new spot Bitcoin ETF inflows or the upcoming Bitcoin halving. And that doesn't take into account Bitcoin's growing role in the global economy. Considering all these factors, Bitcoin's future valuation seems almost unlimited.
However, there is one thing to note here. It's easy to fall into the trap of thinking Bitcoin is worth more than it actually is. For example, during the last cryptocurrency bull market cycle, Fidelity Investments famously predicted that by 2038, one Bitcoin would be worth $1 billion. So be careful with the numbers and assumptions you use.
That said, it's hard not to be bullish on Bitcoin at this point. With major financial institutions on Wall Street currently backing Bitcoin and developing new investment products for it, the future of this cryptocurrency looks very promising.
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Dominique Basurto has a position in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and Goldman Sachs Group. The Motley Fool has a disclosure policy.
The top cryptocurrencies to buy before their value soars by another $500 billion, according to Fidelity Investments, are those published by The Motley Fool.
