Author: Matt Hougan, Chief Investment Officer of Bitwise; Compiled by 0xjs@Jinse Finance
As I write this memo on Tuesday morning, Bit has just set a series of new all-time highs in the past 24 hours, with the current trading price around $88,000. So far this year, it has risen about 100%, and since the historic election on November 5, the increase has exceeded 25%.
When we publish this article, the market may pull back - it has risen too fast and too high - but $100,000 feels within reach.
Such moments will cause emotional fluctuations. Those who held Bit before the November election are overjoyed, which is understandable. But many who didn't hold it feel like they've missed the boat.
For the latter, I want to say: you're not too late to get in. In fact, it's still early before Bit breaks $500,000.
Let me explain.
Reasons for Bit to Rise to $500,000 (or Higher)
First, it must be made clear: no one can guarantee that each Bit will be worth $500,000. We don't even know if it will break $100,000! Bit prices are highly volatile and the outlook is uncertain, and it could pull back at any time.
But in my view, $500,000 per Bit is the right dividing line between Bit's early and later stages, for a simple reason: it marks Bit's transition to "maturity".
As I discussed a few weeks ago, investing in Bit is actually a two-part bet. When you bet on Bit, you're betting on:
1. As governments around the world borrow and devalue their currencies, demand for value-storing assets like Bit and gold will increase;
2. Bit, as a store of value, will become increasingly widely accepted, on par with gold.
The second bet is another way of saying that it's not too late to get into Bit. This bet is still valid. Here's why.
A mature store of value looks like gold. When institutions allocate to gold, or when central banks take billions of dollars off their balance sheets to invest, no one bats an eye. You won't read a lot of media skepticism about gold, and you won't see a U.S. senator forming an anti-gold coalition. Gold has "made it".
Bit is not like that. Even after this latest surge, Bit is still developing. When pension funds and endowments make small investments in crypto, it's still considered news. The U.S. Department of Labor is still warning 401(k) plan providers to be "extremely cautious" about including Bit in their portfolios. And when major hedge fund investors express optimism about crypto, it still causes a stir.
The market has made great strides with the huge success of Bit exchange-traded products (ETPs) and the rise of crypto-friendly policymakers. But until Bit becomes as mundane as gold - widely held by central banks and all kinds of institutions - by definition, it's still early to get in.
So why $500,000? Well, the gold market is now about $18 trillion in size, and Bit is about $2 trillion. This puts the total size of the store-of-value market at around $20 trillion. When Bit matures, it will at least split this market with gold.
There are currently about 20 million Bits in existence - the remaining 1 million will be issued over the next century - so when Bit reaches $500,000, it will occupy half the market share.
Until then, it's still early.
Conclusion: What Does Bit Need to Reach $500,000 (and Why I Think It Could Go Even Higher)
What does Bit need to truly reach $500,000? Among other factors, we may need the same groups that widely allocate to gold today to also allocate to Bit. The biggest missing piece in this equation is central banks.
Today, governments hold about 20% of the world's gold reserves, compared to less than 2% of all Bits. For Bit to approach $500,000, we need to see this gap narrow. This is a daunting task, but we've seen some progress. The biggest example here may be the plan by U.S. Republican Senator Cynthia Lummis of Wyoming to establish a national Bit reserve, with a target of using government funds to purchase over $80 billion worth of Bit. If we start to see this happening, $500,000 Bit becomes very achievable.
But I think it could ultimately go even higher. My $500,000 target is based on Bit eating into gold's market share, but in reality, I think it will expand the entire market. And this target also assumes the store-of-value market is static, when I believe it will grow rapidly as governments continue to borrow and print.
Will we see Bit reach $1 million? Even higher? Absolutely possible. But $500,000 seems like a good starting point.
