2020 was unforgettable, especially for Bitcoin. To help celebrate this year for our readers, we asked our network of contributors to reflect on Bitcoin’s price action, technological development, community growth and more in 2020, and to reflect on what it all could mean for 2021. These writers responded with a collection of thoughtful and thought-provoking articles. click here to read all the stories in our 2020 year-end series.
Bitcoin bet: man I win, crown you lose.
I bet that in 2020, you would never have imagined that a pandemic would take over the world. You could not imagine that the global economy would stop and that we would be left in a major financial crisis. You couldn’t imagine that central banks would start printing money as if it were going out of style.
But here we are. And do you know who is doing very well in this environment?
Bitcoin, of course.
In fact, this is one of the few things you could have guessed for 2020.
Bitcoin is resilient, predictable and has an algorithmic monetary policy. This means that everyone knew that the third reduction in half would come this year. And with a lower offer comes higher prices.
However, how many times before May did you hear that the Halving price was upfront? Remember: at that time, BTC was still under $ 10,000.
As the year is coming to an end, I think we can finally resolve the debate. No, the Halving price was not included. And you know what? As of today, Halving is not yet listed.
Bitcoin reduction by half is priceless
Do a simple exercise:
- Take the BTC price at the time of the third halving
- Apply the first half reduction growth path
- Apply the growth path of the second reduction in half
Assuming that the third halving cycle looks like the previous two, this provides a range of possible growth paths. There is no need to do the math yourself, I take care of you. Here’s what you get:
We are just at the beginning of a new phase of exponential growth, which means that this cycle probably has 15 times more returns remaining.
Then again: no, the price of the halving is not included. It is too early to accept Bitcoin’s bet.
Making the Bitcoin bet
The Bitcoin bet has two components:
- Bitcoin is a store of value
- Bitcoin is an asymmetric bet
The value reserve component is intentional and will not go away. As long as the Bitcoin network is up and running, BTC will be a safe, predictable and debasement-proof way to preserve its wealth.
Sometimes, when central banks around the world rely on a debt monetization strategy to keep the legacy financial system going, you don’t want to pass on a good store of value. This is valid now and will remain valid for ten years.
On the other hand, the asymmetric bet has a time component.
What’s the idea? The Bitcoin market is small. In fact, for an asset that is essentially digital gold, it is ridiculously small.
Do not believe me? Consider the facts that:
- The Bitcoin market with 1 BTC valued at $ 20,000 would be as big as JPMorgan’s total market valuation.
- The Bitcoin market with 1 BTC valued at $ 50,000 would be as big as Google’s total market rating.
- The Bitcoin market with 1 BTC valued at $ 100,000 would be as big as Apple’s total market valuation.
- The Bitcoin market with 1 BTC valued at $ 300,000 would still be less than the total market valuation of gold.
And you’re wondering why giant asset managers like BlackRock haven’t taken a stand yet. The answer is simple: until now, the Bitcoin market was simply very small.
Therefore, for its use case, Bitcoin is at the very beginning of its adoption curve. To reach the same size as the gold market, Bitcoin will have to grow 30 times. This is the asymmetric bet.
If you invest in bitcoin now, you will have the benefits of a store of value and a potential return of 30 times.
Even if you think that the likelihood of Bitcoin being as big as gold is low, it is still worth betting on. Obviously, the sooner you join, the greater the expected reward.
Do the math
You can do the math. I can do the math. Michael Saylor can do the math. This means that smart money can also do the math.
Just look at the influx of grayscale Bitcoin funds in the past year to convince you that smaller institutional investors, family offices and high-net worth individuals have already started to increase their exposure. We can also add some large hedge funds, such as those managed by Paul Tudor Jones and Stanley Druckenmiller.
And don’t forget publicly traded companies, like MicroStrategy and Square, that are investing in bitcoin as a treasury asset.
The point is: Bitcoin is climbing the adoption curve. Deep pocket investors are buying at the same time that the supply is getting thinner. You don’t need complicated models to see the writing on the wall. You don’t have to be a genius to realize that all of this will push the price high enough for bitcoin to start seriously competing with gold in terms of market size.
When that happens, everyone will want a piece of the pie, including large mutual funds and asset managers. And from there, things will turn into something much bigger than we can imagine now.
How long will this take? Ten years? Any less? More? Who knows. This is not under your control.
What is under your control is how you will act now.
Whether you use your favorite stock-to-flow model, apply the growth from previous cycles or do some napkin accounts, it looks like bitcoin will rise above $ 100,000 in 2021. If you have accumulated sats so far, then it is good for you . Keep it up.
If you haven’t invested yet, start from scratch.
Bitcoin is one of those rare asymmetric bets that anyone can place. Don’t let your luck slip away.
This is a guest post from Nick. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.