Apr 17, 2023
Is $1 Million Bitcoin a Crazy Idea?
Matt Hougan
Chief Investment Officer
Could one bitcoin someday be worth $1 million?
That’s the question I’ve been pondering lately as I’ve watched crypto stage a furious rally to start 2023.
Not tomorrow. Not next month. Not by June 17, as former Coinbase CTO Balaji Srinivasan famously bet someone earlier this year.
But … in a reasonable time frame. Like ten years.
When I committed to joining crypto full-time in 2017, I’d hear experts throw out the $1 million bitcoin prediction and shake my head. Bitcoin was trading around $10,000 at the time, so that meant a 100x return. Traditional asset classes don’t have 100x returns.
And yet, as we’ve fine-tuned our models at Bitwise—and particularly as I’ve watched the 2023 rally—those outlandish price targets no longer seem so crazy.
Why? Because we learned something really important in Q1. We learned that bitcoin is not going away. Ever.
Bitcoin entered 2023 on the ropes, amid a massive bear market and following the collapse of FTX, LUNA, and other fallen angels. And then 2023 came and hit bitcoin with everyone it had. The SEC issued a Wells Notice to Coinbase; the CFTC sued Binance; the Department of Justice published warnings about money laundering; the White House aired its grievances; Elizabeth Warren vowed to build “an anti-crypto army”; the Treasury, Federal Reserve, and FDIC attempted to cut off crypto from the banking system; Silvergate, Signature Bank, and Genesis Trading failed.
And yet, here is bitcoin, up 83% YTD,¹ the best-performing asset in the world this year. If Q1 2023 couldn’t kill it, nothing will.
So what does bitcoin look like if it’s still going to be around in 10+ years? At Bitwise, we model bitcoin’s potential value by looking at the markets it is trying to capture and creating estimates of its success. For example: If you think bitcoin is competing with gold, how much of that market will it capture? If bitcoin could store offshore wealth, how much of that market will migrate to bitcoin ? Since the total supply of bitcoin is fixed, this addressable-market exercise makes it easy to arrive at long-term price targets.
You can see our assumptions above. Our calculations suggest that, in a base-case scenario, each bitcoin could be worth $545k within a decade. In a more bullish environment, that figure jumps to nearly $1.1M.
Optimistic? Perhaps. But crazy? Not anymore.
Not convinced? I’d encourage you to make your own estimates looking ahead 10 years and see where you net out.
A Simple Model for Valuing Bitcoin
As of April 14, 2023
(1) Data through April 14, 2023.
Notable News Events of the Week
Ethereum Successfully Completes “Shapella” Upgrade; ETH Rallies Above $2K on News
The highly anticipated upgrade will allow stakers to withdraw their ETH for the first time. It's a big deal: The enhanced liquidity could attract more institutional capital.
Source: The Defiant
Crypto VC Investment Falls to $2.4B in Q1 2023; Remains Above Pre-2021 Levels
Crypto venture capital is a leading indicator of future application development. At $2.4B, Q1 funding is down sharply from 2022 highs, but remains well above levels seen in past bear markets.
Source: Bloomberg
SEC Eyes DeFi With New Rule Change; Move Could Raise Risks for Certain Projects
The agency clarified that a new proposal to expand the definition of “exchange” could capture many DeFi projects within its purview. The proposal is currently in the comment period.
Source: SEC
Crypto vs. Traditional Assets: Performance Monitor
As of April 14, 2023
Source: Bitwise Asset Management with data from IEX Cloud for traditional assets. Crypto asset tickers refer to, in alphabetical order: Bitcoin (BTC) and Ethereum (ETH). Crypto asset returns are historical and unaudited and do not represent the returns of an actual Fund or account. These historical returns are gross of fees, and therefore might not replicate exactly the experience of actual investors. The analysis does not add in the value of hard forks or airdrops; in practice, an investor allocating to crypto assets may have achieved a higher total return by capturing the value of those distributions. Other tickers refer to, in alphabetical order: Vanguard Total Bond Market Index Fund ETF (BND), Coinbase (COIN), SPDR Gold Shares (GLD), SPDR S&P 500 ETF (SPY), and US Oil Fund (USO). Past performance does not guarantee future results. Please see important disclosure information at the end of this document.
Crypto Asset Market Leadership By Month
As of April 14, 2023
Source: Bitwise Asset Management. Crypto asset tickers refer to, in alphabetical order: Cardano (ADA), Cosmos (ATOM), Avalanche (AVAX), Bitcoin Cash (BCH), Bitcoin (BTC), Polkadot (DOT), Ethereum (ETH), Chainlink (LINK), Litecoin (LTC), Polygon (MATIC), Solana (SOL), and Uniswap (UNI). The performance of the Bitwise 10 Large Cap Crypto Index does not represent the performance of any account or Fund managed or issued by Bitwise. This chart represents Index constituent performance only. It is not possible to invest directly in an index. Past performance does not guarantee future results.
Risks and Important Information
No Advice on Investment; Risk of Loss: Prior to making any invesment decision, each investor must undertake its own independent examination and investigation, including the merits and risks involved in an investment, and must base its investment decision—including a determination whether the investment would be a suitable investment for the investor—on such examination and investigation.
Crypto assets are digital representations of value that function as a medium of exchange, a unit of account, or a store of value, but they do not have legal tender status. Crypto assets are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not currently backed nor supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies, stocks, or bonds.
Trading in crypto assets comes with significant risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks and risk of losing principal or all of your investment. In addition, crypto asset markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing.
Crypto asset trading requires knowledge of crypto asset markets. In attempting to profit through crypto asset trading, you must compete with traders worldwide. You should have appropriate knowledge and experience before engaging in substantial crypto asset trading. Crypto asset trading can lead to large and immediate financial losses. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price.
The opinions expressed represent an assessment of the market environment at a specific time and are not intended to be a forecast of future events, or a guarantee of future results, and are subject to further discussion, completion and amendment. The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice, or investment recommendations. You should consult your accounting, legal, tax or other advisors about the matters discussed herein.