The dominant cryptocurrency, Bitcoin (BTC 1.41%), currently accounts for 51% of the entire crypto market by value, which itself is worth about $1.65 trillion. Bitcoin's dominance has ranged from 40% to 60% market share over the last three years.
Building on that, Cathie Wood's Ark Invest -- an asset management firm focused on disruptive technologies like blockchain -- believes the cryptocurrency market could be worth $20 trillion by 2030. That implies about 1,100% upside from its current level, and it implies substantial Bitcoin price appreciation.
Specifically, if the broader cryptocurrency market reaches $20 trillion by 2030 and Bitcoin still accounts for 40% to 60% of that total, then the implied upside for the crypto falls between 840% and 1,400%.
Before casting that estimate aside, consider what other asset classes are worth. The global fixed-income market is valued at $130 trillion, the global stock market is valued at $110 trillion, and above-ground gold reserves are valued at $14 trillion. In that context, a $20 trillion cryptocurrency market is plausible.
CRYPTO: BTC
Key Data Points
Bitcoin is in high demand among retail and institutional investors
Bitcoin prices are a product of supply and demand. However, because its source code limits supply to 21 million coins (of which about 19.6 million now circulate), demand is the only variable of consequence. In other words, whether it becomes more or less valuable depends on whether demand increases or decreases. And there is good reason to believe demand will increase.
Bitcoin is already in greater demand than other digital assets, as evidenced by its dominant position in the cryptocurrency market. Furthermore, while digital wallets from PayPal, Block, and MercadoLibre allow users to buy select cryptocurrencies, only Bitcoin is accessible across all three fintech platforms.
Demand extends beyond retail traders. A survey from consulting firm PwC found that institutional exposure to digital assets continued to increase in 2023, just as it did in 2022, and that Bitcoin and Ethereum remained the most popular digital assets by a wide margin.
Similarly, a recent report from consulting firm Ernst & Young concluded that "most institutional investors believe in the long-term value of blockchain and crypto/digital assets, and plan to scale digital asset investments over the next two to three years." That report also found that Bitcoin (followed by Ethereum) is the most popular digital asset among institutional investors.
The recent approval of spot Bitcoin exchange-traded funds (ETFs) is another sign of growing interest among institutions. Specifically, a spot Bitcoin ETF was approved by the European Union in 2023, and 11 spot Bitcoin ETFs were approved in the U.S. this year.
Spot Bitcoin ETFs could boost demand
Spot Bitcoin ETFs buy the digital currency directly and, therefore, should track its price closely. Those products reduce friction by offering Bitcoin exposure without the hassle of cryptocurrency exchange accounts and blockchain wallets. Investors can effectively buy and sell Bitcoin through existing brokerage accounts by trading spot Bitcoin ETFs.
Some of the largest asset managers in the world now offer spot Bitcoin ETFs, including BlackRock (No. 1 in size), Fidelity (No. 3), Invesco (No. 13), and Franklin Templeton (No. 14). Those reputable firms are especially well positioned to boost demand for Bitcoin given their enormous clientele. In fact, they collectively have more than $15 trillion in assets under management.
Ultimately, spot Bitcoin ETFs could unlock substantial demand from retail and institutional investors. Indeed, Fundstrat analyst Tom Lee says Bitcoin could hit $500,000 by 2029, implying more than 1,000% upside from its current price of $43,000.
Ark Invest is even more bullish. Wood and her team posit a base case where the price per bitcoin approaches $683,000 by 2030, implying more than 1,400% upside.
Bitcoin is a worthwhile investment, but only for certain investors
Cryptocurrency is less polarizing than it once was, but volatility, risk, and regulatory uncertainty are still hallmarks of the market. For that reason, investors with short time horizons (less than five years) and/or an aversion to risk and volatility should steer clear of cryptocurrency.
On the other hand, patient investors comfortable with risk and volatility should consider keeping a small portion of their portfolios in Bitcoin. But they should temper their expectations.
The colossal returns forecast by Ark Invest and other pundits are possible, but they are far from guaranteed. Bitcoin has declined by 45% or more four times in the last five years, and similar declines are likely in the future.
