Back of the envelope calculation of how much capital needs to go into #Bitcoin in order for it to hit $1m per coin.
Answer: $5T or about 1% of global wealth assets.
So far only $620b has been invested.
It used to be everyone would be interested in how was it derived, but these days very few. This is a sign we are getting past the early adopter phase.
The calculation I used takes into account liquidity conditions and makes assumptions on when we hit the price. I picked sooner as this is the most conservative on the capital needed, if it happens later, more capital will be required.
Here's the calculation:
1) What's the market cap need to be at $1m. Assume that it's happening soon so circulating supply is 19.8m coins so $19.8T market cap.
2) What will the multiplier be between capital invested and market cap? This is a measure of the liquidity conditions, the deeper the liquidity, the lower the multiplier.
3) This metric is known, it's called MVRV Ratio. It was 8x in the 2013 top, 4.8x in the 2017 top, 4.0 in the 2021 top. Based on this historic liquidity trend, we can expect the next top to be a 3.5x multiplier, if we hit $1m in the cycle after this, then the multiplier will be even less given the trend in deeper liquidity making it harder to move price per dollar invested. So I'll use 3.5x to be conservative on capital needed.
4) $19.8T / 3.5 = $5.66T needs to be stored in the network. This metric is called Realised Capitalisation. Since the blockchain records every wallet with a time signature, we can estimate the price paid as it enters a wallet. Realised Cap needs to get to $5.66T
5) Since Realised Cap is only $620b today, we need it to climb a further $5T to reach our target.
Again, these are the most conservative estimates. It assumes we hit $1m per coin in a runaway bull market when the liquidity multipliers need less capital to move price, and it assumes the next cycle, if it happens in the cycle after that, then more capital is needed due to lower MVRV-peak and higher circulating supply.
x.com/dallasirushing/status/18...…
Correction. Assumption is $1m per coin in this cycle.
Based on this I DON’T think we get it this cycle given the capital needed. $5T will take time to enter.
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Disclaimer: The content above is only the author's opinion which does not represent any position of Followin, and is not intended as, and shall not be understood or construed as, investment advice from Followin.
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