The appears to be a case for Bitcoin when it comes to a $10,000 coin. Bitcoin, a decentralized virtual currency, seems to be on an unstoppable tear. It rose more than 54% in its value during the first two weeks of August. Since the end of August, the value of Bitcoin was at $4,625/coin. By taking a step back, Bitcoin has exceeded almost all the major asset classes. It has increased more than 520% in a period of one year.
Is this staggering trend sustainable, or are we in a bubble? Several drivers behind a doubling of the currency’s value, so there may be a case for a $10,000 coin in the near future.
Bitcoin is quite scarce. Currently, in circulation, there are just over 16.5 million Bitcoins, representing approximately $71 billion. This amount may seem like a lot, although in comparison to how much currency there’s in circulation – around $5 trillion – and in the currency radar, Bitcoin is just a small dot.
Also, it’s estimated that around 25% of all the mined Bitcoins are lost forever. The reason for this is either due to improperly generated wallets, discarded hard drives, lost keys, or from carelessness.
What does scarcity mean? To start with, it limits the total possible supply of Bitcoin that can be owned. Therefore, if there is an increase in demand, the price needs to go up.
What is the demand?
With the limited Bitcoin supply, the actuality is that there have to be enough people who want it and to use it for the price to increase. For some people, this presents a slight problem as Bitcoin doesn’t have an intrinsic value.
The debate surrounding Bitcoin’s value has two sides. It is no fluke that Bitcoin’s total market value is higher than the likes of American Express, General Motors, and Netflix, seeming taking over whole large-cap companies’ worth of market share growth in only a few weeks.
What is powering this huge growth surge? Here are some reasons as to why Bitcoin has begun gaining a larger adoption, and why the trend has real potential for increasing over the foreseeable future.
- Utility value: It seems that the most significant use case for Bitcoin is a fungible tool. It can be utilized like a fiat currency, for buying and selling goods of value as a form of currency exchange. Also, it’s inexpensive and swift to move when compared to conventional banking.
- Increase in accessibility: It is becoming even easier to buy and trade Bitcoin. CoinMarketCap lists more than 75 exchanges that are actively traded at least $1 million in Bitcoin in the past 24 hours. Also, according to Coin ATM Radar, there are more than 1,400 Bitcoin ATMs that are currently operating. This represents an improvement in the circulation of 100%, compared to a year ago.
- High liquidity: Due to the high daily trade volumes and a strong open order book, traders can buy and sell Bitcoin almost instantly in comparatively large amounts. Bitcoin is convertible to local or other currencies at a moment’s notice.
- Store of value: Even though Bitcoin was not created as a store of value, it has proven that it’s a relatively decent instrument for storing or increasing value over its lifetime. Today, only $1,000 invested in 2010 would have a value of $70 million.
- Non-banked: In a Wired article, Cade Metz made a case regarding how Bitcoin may thrive in the emerging or developing markets, where the local currency could be volatile due to political issues or where most of the population is non-banked. In these particular areas, Bitcoin could be the best alternative to fiat. The reason for this is since all that one requires is an internet-connected device, like a smartphone.
All of the reasons mentioned above make a strong case for Bitcoin’s continued growth and use. However, perhaps the most significant case for Bitcoin is the argument that supports the growth in Bitcoin to $10,000 per coin is the future potential for “big money” to join the party. Examples of this are:
- Grayscale’s Bitcoin Investment Trust: At present, it’s the only publicly quoted and traded security that places a premium of 91% on the price of Bitcoin, with it trading at $7,690 per share (as of late August). If the public markets are prepared to put a significant premium on Bitcoin. This means that the investors are prepared to bet that Bitcoin’s price will rise to support this investment.
- CBOE Future Exchange: They decided to support the Bitcoin futures trading on its exchange, beginning late 2017. This is the first major U.S. exchange that allows speculation by Wall Street on the price of Bitcoin.
Therefore what this means is that with more money that’s going into Bitcoin, the price will go up. There is the chance that big money is already silently moving money into the currency. Then, very soon even more mainstream news outlets will begin to cover the cryptocurrency. When it gets to the point that almost everyone has heard of Bitcoin, that is when Bitcoin will be worth more than $10,000. It isn’t a case of if it will happen, but rather when it will.