Why Bitcoin Will Rise to $500,000 or More: What It Will Take

Author: Matt Hougan, Chief Investment Officer of Bitwise; Translated by: 0xjs@黄金财经

As I write this memo on Tuesday morning, US time, Bitcoin has just hit a series of all-time highs in the past 24 hours and is currently trading at around $88,000. It is up about 100% so far this year and more than 25% since the historic election on November 5.

The market may pull back when we publish this article - it has risen too fast and too high - but it feels like $100,000 is just around the corner.

Moments like this can cause emotional fluctuations. People who held Bitcoin before the November election are ecstatic, and rightly so. But many who didn't hold it feel as if they have missed the opportunity.

To the latter group of people, I want to say: It's not too late for you to get in. In fact, it's still early until Bitcoin breaks through $500,000.

Let me explain.

The Case for Bitcoin to Go to $500,000 (or More)

First of all, let me be clear: there is no guarantee that Bitcoin will be worth $500,000 per coin. We don’t even know if it will ever break $100,000! Bitcoin prices are volatile, the outlook is uncertain, and a pullback could occur at any time.

But in my opinion, $500,000 per coin is the right dividing line between the early and late stages of Bitcoin for one simple reason: it marks the “maturity” of Bitcoin.

As I discussed a few weeks ago, investing in Bitcoin is really a two-pronged investment. When you bet on Bitcoin, you are betting that:

1. As governments borrow money and devalue their currencies, demand for value stores like Bitcoin and gold will increase;

2. Bitcoin will become more widely accepted as a store of value, on par with gold.

The second bet is really just another way of saying it’s not too late to buy Bitcoin. That bet still holds up. Here’s why.

A mature store of value asset looks like gold. No one makes a fuss when institutions allocate to gold or when central banks take billions off their balance sheets to invest. You don’t read a slew of media reports skeptical of gold or see sitting U.S. senators forming an anti-gold bloc. Gold has “made it.”

Not so with Bitcoin. Even after this latest run-up, Bitcoin is still a work in progress. 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 not to include Bitcoin in their portfolios, citing the need for “extraordinary caution.” And when large hedge fund investors express bullishness on crypto, it still causes a stir.

With the runaway success of Bitcoin exchange-traded funds (ETPs) and the rise of policymakers who support crypto, the market has come a long way. But until Bitcoin becomes as mundane as gold — widely held by central banks and institutions — it’s not too late to get in, by definition.

So why $500,000? Well, gold is an $18 trillion market today, and Bitcoin is about $2 trillion. That makes the store of value market about $20 trillion. When Bitcoin matures, it will at least share that market with gold.

There are about 20 million Bitcoins in existence today — the remaining 1 million will be minted over the next century — so when Bitcoin reaches $500,000, it will have half the market.

Until then, it’s still early.

Conclusion: What It Takes for Bitcoin to Go to $500,000 (and Why I Think It Will Go Much Higher)

What does it take for Bitcoin to actually go to $500,000? Among other things, we’d probably need the same groups that are widely invested in gold today to also invest in Bitcoin. The biggest missing link in this equation is the central banks.

Today, governments hold about 20% of the world’s gold reserves, compared to less than 2% of all Bitcoin. For Bitcoin to get anywhere near the $500,000 mark, we need to see that gap close. That’s a tall order, but we’re already seeing some progress. Perhaps the biggest example here is Senator Cynthia Lummis, R-Wyo.,’s plan for the U.S. to establish a national Bitcoin reserve with the goal of buying more than $80 billion worth of Bitcoin with government funds. If we start to see that happen, $500,000 in Bitcoin is entirely achievable.

But I think it will eventually go much higher. My $500,000 target is based on Bitcoin cannibalizing gold’s market share, when in reality, I think it will expand the entire market. And it also assumes that the store of value market is static, which I think will grow rapidly as governments continue to borrow and print money.

Will we see Bitcoin go to $1 million? Or even higher? Absolutely. But $500,000 seems like a good place to start.