Is cryptocurrency here to stay or is it a passing fad?
With the next BTC halving expected to come in April 2024, the block rewards will fall from 6.25 BTC to 3.125 BTC. Traditionally, this means volatility, and optimistically, new ATH’s for BTC.
Regardless, we still have a long way to go as we continue to range indecisively on whether or not we are in a bull or bear market. With that in mind, many of us are hoping we can create generational wealth within the next few years with cryptocurrency. That begs the question, is it possible for BTC to hit 1 million by 2030, or if so, how much BTC would we need to be millionaires.
Largely this is a very controversial topic, with several influencers or whales for or against this statement.
For example, some even value BTC at $10,000,000!
Others such as Standard Chartered, predict $120,000 by 2024.
Of course, many of the statements can be considered contradictory, misleading, or inaccurate. Here’s my thoughts on what BTC will be valued at by 2030.
A Primer on Valuing $BTC
Here’s my theory. There are many traditional and tangible methods of valuing cryptocurrency. For example, TradeFi valuation methods (that actually apply), veTokenomics, FDV and so on and so forth.
I believe that cryptocurrency is valued highly if enough people agree that it is valuable. It’s a game of supply and demand, and economics. Traditionally, public companies in the stock market are valued by their P/E ratio, their revenue per quarter, or their market capitalization.
In crypto, it’s a different ball game. Most crypto products are pre-revenue, meaning their valuation falls on intangible benefits, and not so much on tangible benefits. That means we can’t compare it the same way we value Web 2 companies.
For example, have we ever tried to value an NFT, say for example Azuki.
Many of us would think long and hard, trying to justify why it is priced as such. Eventually, hardcore believers come to the basis of community benefits, and most importantly, airdrops.
Apart from that though, there isn’t really much rationale behind holding one of these coveted blue-chip NFTs. The price of the NFT is therefore determined by supply and demand, and the “intrinsic” value of the NFT. This was evident when Azuki Elementals crashed the entire collection to a lower price due to poor execution of the mint.
The same can be said for BTC. While it remains one of the more stable cryptocurrency blue-chips, its price-action is largely dependent on market demand, and not any traditional methods of valuation.
A More Complex View on Pricing
There have been many predictions such as Plan B which predicted $100K BTC, but ultimately failed. However, this model could still be valid for the next halving . Despite the price surge in 2023, long-term investors have refrained from selling.
However, the profits of short-term holders do suggest a risk of further correction.
If we follow the stock-to-flow model based on BTC halving cycles, BTC could see significant price appreciation after the next halving in April 2024.
Source: Jesse Myers
Myers, a Standard MBA graduate and fund manager suggests that “it takes longer than four years for the changed stock-to-flow reality of each halving to be fully digested by the world”
That being said, what if we were to form another approach to valuing bitcoin instead of supply side valuation (Stock-To-Flow model)?
Let’s look at demand side valuation, in other words, adoption of the asset.
Modern network effect theories suggest adoption is created by unique value propositions. For example, we use social media such as Twitter, Instagram, or LinkedIn because they provide a value proposition of communicating and sharing content.
Similarly, BTC was created to provide alternative modes of payments as its basis. Overtime, it has evolved to other use cases such as NFTs. This is similar to other features of social media that have developed over time.
Source: Fidelity Investments & World Bank
Adoption curves are a strong indication of demand and vary significantly per industry. BTC currently follows a curve quite similar to internet industries.
Source: World Bank
For example, if we take a look at an analysis by Fidelity Investments, we can note that BTC addresses vs. cellphones have very similar trends, and this is a useful proxy because of Metcalfe’s Law.
Metcalfe’s law, which was proposed in 1980, states that the financial value or influence of a telecommunications network is proportional to the square of the number of connected users.
That means we could see adoption similar to cell phones, and from there we can extrapolate out a price relationship.
If we hypothesize it out even further, modeling the price of BTC as a monetary asset through market forces, we could see any of the following scenarios, weighing in competition.
Chart of BTCDOMUSDT (1 Week Timeframe)
I’m predicting that BTC will have a monopoly in the long term as most alt-coins die off (BTC has always had stable and significant price action), and coupled with decreasing supply and increasing demand in the long term, we will see a supply shock.
Therefore, we can predict prices to be around pM valuation, if we put all cryptocurrencies on a supply demand axis to predict competition and price.
I am personally not a huge fan of price prediction. Cryptocurrency is a very volatile asset and unlike stocks, often does not have rationale behind price movements apart from market sentiment.
However, based on all of this analysis, I believe that $100K BTC is definitely possible, which means you would need about 10 BTC to be a millionaire by 2030. My thesis can be broken down into these parts:
- We still have 2 more halvings before 2030 (The halving was initially designed as a countermeasure to inflation. However, it now acts as a speculation event since price will increase even if demand is the same, due to increased difficulty to increase supply (mining rate))
- Digital assets generally appreciate overtime. However, due to psychological acceleration in society today, I believe digital assets will follow a path of innovation theory. In other words, faster technological adoption and higher prices
- BTC is a fundamental currency that drives economies and trades in less-developed countries.
These are just my thoughts. It is always good to make your own judgment call before investing for the short term or long term.
[Editor’s Note: This article does not represent financial advice. Please do your research before investing.]
Featured Image Credit: Chain Debrief