Matt Hougan, investment manager of Bitwise Asset Management, one of the world’s leading digital asset management companies, predicted that Bitcoin could reach $ 1 million in the long term. Their assessment of this prediction, which is often met with skepticism in the market, emphasizes the need to review the fundamental assumptions made in Bitcoin’s valuation.
Basic Approaches to Valuing Bitcoin
In the latest evaluation written by Matt Hougan and published by the company, it is stated that static calculations made with classical methods do not fully reflect the potential of Bitcoin. Hougan states that Bitcoin essentially acts as a storage medium similar to gold, and therefore it is important to analyze the market size correctly. Bitwise’s manager states that since Bitcoin has the total supply, the valuation should be made according to the size of the custody market and its share in this market.
The Future of the Global Storage Instrument Market
In Hougan’s analysis, it is stated that gold and Bitcoin are in the custody instrument market worth approximately $38 trillion in total. While gold accounts for most of this amount, the current market value of Bitcoin is approximately $1.4 trillion. This means that Bitcoin currently has a share of nearly 4 percent of the market. It is noted that with today’s figures, in order for Bitcoin to reach $ 1 million, it will need to capture more than half of the current custody market.
However, Hougan’s main argument is that market size has not remained static historically. The increase in the market value of gold, especially in the last 20 years, indicates that the custody instrument market may grow, along with macroeconomic uncertainties and changes in monetary policies.
Corporate Investment and Growth Possibilities
Considering historical data, it is seen that the gold market, which had a size of approximately 2.5 trillion dollars in 2004, has reached the level of almost 40 trillion dollars today. Hougan predicts that the custody market could reach $121 trillion in the next 10 years. In this scenario, Bitcoin would only need to capture 17 percent of the total market for its market cap to reach $1 million.
In his published note, Hougan shared his assessment: “If the global custody instrument market increases to approximately $121 trillion in 10 years, Bitcoin will only need to gain 17 percent of the market to reach one million dollars.”
It is observed that Bitcoin has reached rates ranging from 1 percent to 5 percent in the asset distribution in portfolios, with the recent increasing corporate interest. The launch of spot Bitcoin exchange-traded funds in the US has enabled institutional investors, especially large asset management companies and funds, to become more involved in the market.
However, Hougan reminds that the projections made in his report are based on various assumptions and that it is not certain that they will occur under all circumstances. It is possible that the custody market will not grow at the expected rate or Bitcoin will not get the predicted share from the market.
Hougan argues that the biggest mistake in calculating Bitcoin’s value is valuing it based on a fixed share in a growing market. In his own words, it is emphasized that when the growth in the custody instrument market and Bitcoin’s share in this market are considered together, prices much higher than current levels may emerge.
Bitcoin was traded in the 70 thousand dollar range on the date of publication of the news.
