The way bitcoin prices fluctuate, it would seem nearly impossible to predict prices even beyond a mere 24hr period. However, the cryptocurrency that started out in 2009 being worth almost nothing (it took it a few month months to be worth at least a dollar) has gone on to become the largest cryptocurrency in the world with a market capitalisation of $850 billion, and it is now worth more than $46,000 for a single bitcoin. The coin that has seen its price drop to as low as $30,000 in the previous few months looks to have its worst days this year behind it, as it has kept rising in the last two weeks.
Although there is no accurate method to predict what the actual price of bitcoin is going to be in both the near term and the long term, there are some key factors analysts look at before making their predictions for the next year, the next five years, or even the next ten years. Bitcoin is more than ten years old, and it is steadily entering every section of the global economy, which is almost a guarantee that it will be here for longer than critics expected.
From governments accepting it as legal tender to mainstream companies taking it as a mode of payment for goods and services (e.g. PayPal, MicroStrategy, Microsoft, and recently AMC Entertainment), and not forgetting governments allowing institutional funds to invest up to 20% of their holdings in Bitcoin, the digital asset seems to be on the road to infiltrating the broader global economy.
Now that the question of bitcoin’s longevity has been answered, albeit partially, investors, analysts, and critics alike are speculating and wondering how much this virtual, valuable currency that also doubles as an asset will be worth in 10 years.
To answer this question, we will look at a few factors behind bitcoin’s growth.
Bitcoin’s market cap growth
As mentioned earlier, Bitcoin was worth nothing at its inception in 2009. The cryptocurrency has registered tremendous growth through several booms and bumps over the years. It is now closing in on a trillion dollars in market capitalisation, currently standing at $850 billion.
Michael J. Saylor, Chief Executive Officer (CEO) of software company MicroStrategy, Inc. (ticker: MSTR), said that once bitcoin’s market capitalisation passes that of gold, nothing will be able to stop it. Gold, with a market capitalisation of $11.15 trillion, is regarded as a store of value, and the same has been said of bitcoin, although its price fluctuates more than that of gold.
Although he doesn’t say when, Saylor asserts that in the long run, bitcoin could reach a market capitalisation of $300 trillion, and if it does so, its value will then rise to $14 million. Saylor believes that one bitcoin could be worth as much as $14 million at some point in the future. It should be noted that MicroStrategy was the first mainstream company to invest in bitcoin, and it currently holds more than 100,000 bitcoins worth more than $3 billion.
There will be a finite number of Bitcoins in circulation
Since its inception, we have always known that bitcoin supply is finite, unlike fiat currency. The makers of bitcoin designed it so that when the last coin is mined, there will be 21 million bitcoin in circulation and nothing evermore.
This means that after this, supply will be limited, but demand will rise, which will increase the cryptocurrency’s value over time. The currency’s finite supply also undergoes a halving process every four years, which means that bitcoin miners get paid half that price every four years.
This was a good economic idea, as it effectively cuts Bitcoin’s inflation rate in half every four years. In practice, bitcoin is a hedge against inflation. This means that by design, bitcoin automatically guards itself against inflation even without the intervention of Central Banks like they do with fiat currency.
It is a digital currency, so it is durable
Bitcoin is not like your usual fiat currency could be wet and washed away by rain or have your coins rust! Your bitcoin is durable and will remain free from wear and tear as long as bitcoin transactions remain digital on the blockchain. This is a considerable step toward easing digital peer-to-peer transactions.
With blockchain technology, developers are continuously building new tools and improving existing ones to improve several aspects of the technology, such as the ease of making transactions, efficiency, and security of both transactions and digital assets.
Bitcoin is open
The majority (74%) of cryptocurrency owners today are relatively young people (between the ages of 25 and 44) because these digital assets are open for everyone with a few dollars to spare to invest. Although bitcoin is pricey, you can buy portions of it known as “satoshis” from sellers on brokerage firms for as little as $2 on platforms like Coinbase.
This is different from assets like stocks, which are mostly gatekept for wealthy investors tucked away in big Wall Street institutional investors and billion-dollar hedge funds that would make them unaffordable for a novice investor trying to make a few dollars off a trade. Bitcoin is a come-as-you-are kind of asset.
So if you are thinking long term, a $100 investment in bitcoin could earn you a few hundred thousand dollars in 10 years.
In other bitcoin news…
As bitcoin value keeps rising, bitcoin miners are making a killing out of it, if a recent study done by ETC Group is to go by.
According to data from ETC Group that analysed the performance of the three biggest cryptocurrencies in the world, Bitcoin, Ethereum, and Litecoin, the Annualized Revenue Run (ARR) paid to Bitcoin miners in the form of transaction fees (network revenue) reached $2.98 billion, which is more than what an e-commerce company Shopify (ticker: SHOP) and digital payments company Square (ticker: SQ) made in the same period.
The two companies earned net revenue of $2.92 billion and $2.98 billion, respectively. The ETC Group also provides exposure to the three cryptocurrencies mentioned above, analysis, and commentary on the market and technical developments.
PS: Projected bitcoin prices are purely speculative and should not be used as a conclusive guide to investment.