Bitcoin (BTC +0.59%) might be trading 42% off its record from last October (as of April 11), but investors shouldn't let that distract them from the dominant cryptocurrency's unbelievable rise. It can be difficult to wrap your head around a 10-year trailing return of 17,000%.
The focus now turns to the next decade. What follows is a discussion of where Bitcoin could be trading in 2036.
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Dissecting the "digital gold" narrative
Bitcoin is often compared to gold, with the former being viewed as a "digital gold." This narrative makes sense. Bitcoin is scarce, as it has a maximum supply cap of 21 million units. And there is only a fixed amount of the precious metal on Earth, whether above or below the ground. Consequently, both of these assets are grouped as being stores of value, with Bitcoin being an emerging one and gold being established.
But any critical thinker will quickly realize that Bitcoin is superior to gold on multiple criteria. Gold wins the battle of longevity. Bitcoin, however, is more portable, verifiable, and divisible. It can be used in transactions (more on this below).
And it's scarcer, as the supply can't change based on demand fluctuations. About 23% of gold on Earth still hasn't been mined. Less than 5% of Bitcoin is left to be mined.
I believe it's reasonable to expect Bitcoin's market cap, now at $1.5 trillion, to chip away at gold's value, estimated at $33 trillion (above-ground reserves), over the next decade. Assuming the digital asset gets to half the market cap of gold, Bitcoin will be worth 11-fold more in 2036. This would put its price at around $800,000.
CRYPTO: BTC
Key Data Points
Added upside from being a medium of exchange
Besides its promise as a new store-of-value asset, Bitcoin's market cap and price can get a further boost from its utility as a more widely adopted medium of exchange. This is the ultimate end game, one in which Bitcoin is viewed less as a tool for financial gains and more as a facilitator of everyday commerce. The upside from this can be absolutely massive.
The biggest factor here is that merchants must start accepting payments in Bitcoin. They might consider doing this since the cryptocurrency allows them to avoid paying fees to payment processors, which can support higher margins. There is also no chargeback risk, and transactions are settled much faster.
Fintech enterprise Block is powering this movement. Its Square segment just enabled Bitcoin payments acceptance for its millions of merchants. This is a major step toward Bitcoin becoming an entrenched medium of exchange.
If adoption starts to rise for this use case, then Bitcoin's market cap will grow much more than the aforementioned 11-fold gain that comes just from the "digital gold" argument.
