Global Cryptocurrency Prediction: Bitcoin Projected to Reach $189,000 According to Financial Experts, as Global Liquidity Surpasses $127 Trillion
In a recent report by digital asset firm CoinShares, Bitcoin's potential price surge has been predicted to reach approximately $189,000, marking a significant increase from its current price of $113,500. This projection is based on the Total Addressable Market (TAM) model, a method used to estimate the maximum potential market size for a product or service.
The TAM model, when applied to Bitcoin, involves estimating the total value of certain financial markets that Bitcoin could potentially capture. These markets often include a portion of the global money supply M2 and the market capitalisation of gold. By calculating the combined market caps or values of these assets, analysts create a large "market" for Bitcoin. They then estimate what price Bitcoin could reach if it achieved a specific market share, however small, of these combined markets.
For instance, the global M2 money supply includes cash, checking deposits, and easily convertible near money, representing a broad measure of money in circulation worldwide. Gold's market capitalisation, on the other hand, is the total dollar value of all above-ground gold. Bitcoin proponents argue that Bitcoin's fixed supply combined with its properties as "digital gold" means it could capture some fraction of these stores of value.
To use the TAM model in this context, analysts first sum the current value of global M2 and gold markets to represent the "addressable market" for Bitcoin. They then assume Bitcoin captures a small portion of this total (e.g., 1%, 5%, or 10%) and divide that value by Bitcoin's fixed circulating supply to estimate a potential price per Bitcoin. This approach does not guarantee prices but offers a theoretical ceiling based on established large markets Bitcoin might displace or complement as a store of value.
If Bitcoin captures 2% of global M2 and 5% of gold's market cap, it could reach a $189,000 price tag. However, it's important to note that this potential price increase does not assume that Bitcoin will take over corporate treasuries or forex reserves.
The TAM model highlights the scale of the opportunity Bitcoin could potentially tap into. Global liquidity, known as M2, is currently sitting at roughly $127 trillion, while the total value of all mined gold adds up to almost $24 trillion. CoinShares uses data from the World Gold Council, Trading Economics, and Glassnode to keep the numbers up-to-date.
It's essential to remember that the TAM model skips over many real hurdles, including regulation, competition from new digital coins, changes in interest rates, and fluctuations in gold's market value. The timeline of Bitcoin's potential market capture might creep up over the next decade, assuming steady gains in user trust, clearer rules from governments, and smoother ways for big institutions to buy and hold crypto.
In conclusion, the TAM model calculates Bitcoin's theoretical price ceiling by applying its potential share of large, existing financial markets like global M2 and gold’s market cap. This model guides investors on possible long-term valuation based on market capture assumptions. However, it's crucial to approach these predictions with a degree of scepticism, considering the numerous factors that could influence Bitcoin's price in the future.
[1] Total Addressable Market (TAM) Definition: https://www.investopedia.com/terms/t/total-addressable-market-tam.asp [2] Understanding the Total Addressable Market (TAM): https://www.forbes.com/sites/forbesagencycouncil/2018/04/17/understanding-the-total-addressable-market-tam/?sh=48824e1b426a
(Image: Unsplash, Chart: TradingView)
- The Total Addressable Market (TAM) model, as used by digital asset firm CoinShares, predicts that Bitcoin could potentially reach a price of approximately $189,000, which is significantly higher than its current price.
- This projection is based on estimating the total value of certain financial markets that Bitcoin could potentially capture, such as the global M2 money supply and the market capitalization of gold.
- By capturing a small portion of these markets, analysts can estimate a potential price per Bitcoin, as demonstrated by the example of Bitcoin capturing 2% of global M2 and 5% of gold's market cap, which could result in a $189,000 price tag.
- However, it's important to note that this potential price increase does not assume a complete takeover of corporate treasuries or forex reserves by Bitcoin.
- The TAM model emphasizes the large scale of the opportunity Bitcoin could potentially tap into, considering the current global liquidity (M2) of roughly $127 trillion and the total value of all mined gold added up to almost $24 trillion.
- Despite the optimistic projections, the TAM model overlooks several real-world challenges, including regulation, competition from new digital coins, changes in interest rates, and fluctuations in gold's market value.
- As such, while the TAM model offers a theoretical ceiling for Bitcoin's price, investors should approach these predictions with a degree of scepticism, considering the numerous factors that could influence Bitcoin's price in the future.
