Amara’s Law — We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.
With bitcoin hitting new highs, an ever-present question is … how high can bitcoin go? The tl;dr answer is
- Crypto is the biggest thing to happen in the history of humanity
- Amara’s law suggests we’re underestimating the impact of bitcoin
- At parity with $1 (100 cents = 100 sats = 1 dSat or dollar SAT ) bitcoin is worth $1M
- While it’s difficult to comprehend a market cap of $18.5 trillion ($1M per Bitcoin), we get there by achieving just 5% of the global market cap of stocks and bonds in 2031 or equaling the value of gold in 2031, or by adding the same value per day that Apple has added since March.
I’ve written about the folly of predicting bitcoin’s price even one year out, but that hasn’t stopped me from making price predictions before. So while this is a price prediction I’ll stand by, this is more about giving context to bitcoin $1 million.
I know many will laugh at me. And maybe they’re right. But I’m not writing this to convince the naysayers. This is for the growing community of people (including Michael Saylor, Paul Tudor Jones, Stanley Druckenmiller, Bill Miller….) who have seen the crypto light. And I’ve been laughed at before for making seemingly outlandish predictions and been proven right. So f-ck ’em.
$1 Per dSat = $1 Million Per Bitcoin
The atomic unit of the dollar is $.01, or one cent. And 100 of those atomic units are referred to as a dollar.
A bitcoin can be divided into 100 million atomic units, or satoshis (or sats for short).
And 100 of those atomic units are referred to (by me) as a Dollar Sat, or dSat for short.
If 100 of the atomic units of bitcoin reaches parity with 100 of the atomic units of a dollar, then we have bitcoin $1 million.
A value of $1 per dSat would equate to $18.5 trillion in fully diluted market cap for bitcoin (that assumes 2.5 million lost bitcoin, a low estimate). The human mind struggles to comprehend a number that large, so we often dismiss it out of our own inability to put it into context. So the rest of this piece gives context to $18.5 trillion.
The Market Cap Of The U.S. Dollar (i.e. M2) Is $19.2 Trillion, and Growing FAST
M2 includes all cash and coins in circulation and checking accounts (M1), plus money in savings accounts and money market funds that can easily be converted into cash. Since the latest round of quantitive easing started in March 2020, M2 has grown by an astounding $4.7 trillion. And M2 will continue to grow into the future, with expectations of another $1.2 trillion in 2021. So $18.5 trillion is less than 4X the number of dollars the fed has printed in just the last 9 months.
Apple’s Epic Rise To $2.3 Trillion In Value Includes $4.7 Billion In Value Accretion Per Day Since March 2020
Apple was the first company to reach $1 trillion in market cap in August 2018, 42 years after its founding, averaging $64.7 million in value creation every day for 42 years to achieve the $1 trillion in value.
It took Apple just two years and 17 days to add another $1 trillion in value. That works out to $1.3 billion in value created every day for those 747 days.
However, we entered a new monetary world beginning March 15, 2020, when the Fed embarked on a large-scale program to stabilize a collapsing economy given the impact from the COVID-19. The market bottomed the following day. Since then, Apple has averaged $4.7 billion in value creation every day.
If bitcoin averaged $4.7 billion of value creation starting today, it would hit $18.5 trillion on September 14, 2031. That would be a growth rate of 36% per year, for the next 10 years.
To put 36% growth per year for 10 years into context, Netflix was the best performing stock of the last decade, growing 43.7% per year. So it’s been done, but not often.
Bitcoin Reaches $1M At Just 5% Share Of The Total Market Cap Of Global Stocks And Bonds In 2031
Given where the total market caps of stocks and bonds are today, and assuming historic growth rates, bitcoin reaches $1 million in value by reaching 5% of the value of those markets in 2031:
Is 5% reasonable? You can decide for yourself, but it doesn’t feel unreasonable to me given bitcoin’s unique properties.
Bitcoin Reaches $1M If It Equals Gold’s Market Cap In 2031
Given where the total market cap of gold is today, bitcoin reaches $1 million in value by equaling the value of gold in 2031:
Given all the innovation bitcoin is bringing to the store of value ecosystem, it could easily double in value. So bitcoin equaling the value of gold in 10 years seems the most reasonable of the assumptions made in this piece.
And remember, it’s just not bitcoin that is going up, it is the dollar that is going down.
Reprinted by permission. This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.
