Bitcoin (BTC +3.30%) has been on a wild ride the last few years as it spiked to highs above $60,000 and currently trades between $16,000 and $17,000 as I'm writing.
It wasn't long ago that investors believed this cryptocurrency could reach $100,000 or more. Could it reach astronomical new heights of over $1 million in the future? Let's look at the thesis behind Bitcoin's value.
CRYPTO: BTC
Key Data Points
The best digital store of value
I think the best argument for Bitcoin's future value appreciation is that it's a digital store of value, like gold. The token is scarce because it's limited at 21 million when all are mined and there will never be more.
For investors who are looking for a place to store wealth that's not in stocks, bonds, real estate, or other traditional goods, this could be a good option in the digital world.
The challenge is that if Bitcoin reached $1 million, the value of all Bitcoins would be $21 trillion, more than the $11.7 trillion of all gold today. Could Bitcoin be worth more than all of the world's gold?
The inflation-hedge argument has lost credibility
One of the talking points of Bitcoin advocates in 2020 and 2021 was that it would be a hedge against inflation. Now, inflation is here, and Bitcoin has proven to be a worse hedge than just holding dollars.
Bitcoin Price data by YCharts.
If there's one chart that's concerning for Bitcoin's value proposition, it's this one (above). Gold has held steady over this time, showing that it's at least a decent hedge, but Bitcoin has proven to be more of a speculative commodity than a hedge against inflation.
Bitcoin has fallen behind as a utility token
The last three years have also proven that multiple blockchains have passed Bitcoin in terms of speed and functionality. According to a study by venture capital firm A16Z released in May 2022, Ethereum (ETH +8.33%) has nearly 4,000 developers; Solana has nearly 1,000; and the oldest blockchain, Bitcoin, has just over 500 developers.
Bitcoin's blockchain wasn't built with smart contracts in mind like Ethereum or Solana (SOL +3.75%) were, and that's fundamentally put the blockchain behind in utility development. It's also much slower than a blockchain like Solana, which is completing around 3,000 transactions per second. And Bitcoin is far more costly than Solana's fraction of a penny cost.
If the blockchain is going to be used for real utility, it's likely not going to happen on Bitcoin.
Is $1 million ever reachable?
I don't think it will ever reach that far.
Bitcoin has proven to be a store of digital value, but like gold, it will have limited upside because of its limited-use cases.
I think there's far more upside in tokens like Ethereum and Solana that have blockchains used for real utility. That's where the value will be created in decades to come.
