“When I joined crypto full-time in 2018, I used to hear people say that and laugh. At the time, Bitcoin was around $4,000, and $1 million sounded absurd—even to me,” Hougan wrote.
“I no longer see it that way,” he asserted.
According to the crypto asset manager executive, Bitcoin is an “emerging store of value” asset, and is poised to pull a portion of the global store of value market cap in turn.
“The basic math for estimating its value is straightforward: Estimate the size of the store-of-value market, estimate Bitcoin’s share of that market, and divide by 21 million,” Hougan wrote. “That gives you an implied price."
At it currently stands, the top crypto asset makes up less than 4% of a nearly $40 trillion store of value market cap. Therefore, at its current mark, Bitcoin would need to capture around half of the entire market, 14x from its current standing, to be priced at $1 million a coin.
“This is why $1 million per Bitcoin sounds unreasonable to many, and why I dismissed it for years,” he wrote.
But the store of value market cap is “not static,” he argued, noting the asset classes' considerable rise in recent decades. Gold alone has seen its price increase by 80% over the last year, recently changing hands around $5,200 per ounce, bringing its total market cap to around $36 trillion at the time of writing.
“The mistake people make when evaluating Bitcoin’s potential is ignoring this growth,” he said. “If this growth rate continues, the global ‘store of value’ market will be ~$121 trillion in 10 years. At that level, Bitcoin only needs to take 17% of the market to be worth $1 million a coin.”
And while it still will take strong gains to get there, with institutional acceptance, ETFs, and declining volatility, Hougan believes Bitcoin is positioned to do so.
However, macroeconomic factors will need to contribute to that ascent. If not, then the store of value market cap may not rise, gold prices could fall off, and Bitcoin could simply fail to gain market share, he said.
“As I see it, the base case—that the store-of-value market will continue to grow as it has, and Bitcoin will continue to gain market share as it has—leads you to much, much higher prices than we have today,” Hougan wrote.
These are terrible takes. Bitcoin is an emerging store of value. You cannot ask it to emerge from nothing as mature as gold.
Imagine it in 2009 as a newborn. It is 100% speculation.
Skeptics may dismiss Bitcoin's chances, given the asset's ups and downs, but Hougan told Decrypt following the publication of his note that he believes the rise to $1 million will come with the leading cryptocurrency's continued maturation.
"I don't think its reasonable to ask Bitcoin to act like a fully mature store of value at this point in its journey," he said. "It's less than 20 years old!"
