Global Asset Manager VanEck’s Bitcoin Valuation Model: $2.9 Million per Coin by 2050

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As a seasoned researcher with a strong background in financial markets and technology trends, I find VanEck’s Bitcoin valuation scenario intriguing. Having closely followed the cryptocurrency market for years, I have witnessed its incredible growth and volatility firsthand. The idea that Bitcoin could become an integral part of the International Monetary System and capture significant market share from traditional currencies is not far-fetched, considering the rapid pace of technological innovation and changing global economic dynamics.

Matthew Sigel, Head of Digital Assets Research, and Patrick Bush, Senior Investment Analyst at VanEck, discussed in a blog post how Bitcoin could potentially reach a price of $2.9 million per coin by 2050. This estimation stems from their belief that Bitcoin will become a significant player in the International Monetary System and displace a considerable portion of the market share held by the major four currencies: USD, EUR, JPY, and GBP. The following article summarizes the essential points from VanEck’s research paper on this topic.

VanEck’s Key Assumptions

    Bitcoin will be widely used in international trade as a medium of exchange and store of value.As Bitcoin becomes more useful and valuable, central banks and long-term investors will hold more BTC, reducing the circulating supply.Global trade will grow at 2% annually, slower than the projected 3% global GDP growth, due to populist movements and re-shoring trends.The Principal Four currencies will lose market share in international trade due to deteriorating economic fundamentals and eroding property rights.Bitcoin will capture 10% of cross-border payments and 5% of domestic trade.Central banks will hold 2.5% of their assets in Bitcoin.85% of Bitcoin’s supply will be effectively removed from circulation due to long-term holders.Bitcoin’s velocity will be around 1.5, similar to the average U.S. monetary velocity since the Global Financial Crisis.

VanEck’s Valuation Methodology

” could be:

  1. GDP of local and international trade settled in Bitcoin
  2. Supply of actively circulating Bitcoin
  3. Velocity of Bitcoin

The team initiated their analysis by determining global trade and the world’s economic output (GDP) according to the 2023 benchmark data and expansion forecasts. Subsequently, they estimated Bitcoin’s hypothetical portion of cross-border transactions compared to other currencies frequently utilized in international commerce.

According to VanEck’s projections, the Principal Four currencies are anticipated to see a decrease in market share by approximately 20%. During this time, the Chinese renminbi, Bitcoin, emerging market currencies, and gold are expected to collectively capture that lost share. In this particular forecast, Bitcoin is estimated to account for around 10% of global cross-border payment transactions and about 5% of domestic trade volume.

By the year 2050, it’s projected that central banks will own approximately 2.5% of their assets in the form of Bitcoin. Furthermore, given its role as a store of value, it’s anticipated that around 85% of all existing Bitcoins may have been withdrawn from circulation by long-term investors.

Based on the given assumptions and a projected Bitcoin velocity of 1.5, VanEck’s model estimates that each Bitcoin will be worth around $2.9 million in the year 2050. This value would equate to roughly 1.66% of all financial assets, significantly higher than the current estimated 0.1% share.

VanEck’s Bitcoin Layer-2 Valuation

VanEck proposes a methodology for estimating the potential value of Bitcoin Layer-2 (L2) solutions, considering their significance in expanding Bitcoin’s capacity for broader acceptance. This assessment calculates the total potential revenue generation for businesses that could leverage public smart contract platforms such as Ethereum and Bitcoin L2s.

Key points on VanEck’s L2 valuation

  1. Bitcoin L2s are expected to capture 50% of the smart contract platform market.
  2. The L2 ecosystem is projected to consist of tens of thousands of solutions, including state channels, rollups, and future technologies.
  3. Financial entities worldwide are expected to build their own L2s to house Bitcoin-related activities.
  4. The entire suite of Bitcoin L2s is valued at $7.6 trillion, representing about 12.5% of Bitcoin’s projected value.

Potential Risks to VanEck’s Valuation Model

VanEck acknowledges several risks that could impact their Bitcoin valuation thesis:

  1. Sustainability concerns related to Bitcoin mining’s energy consumption
  2. Potential failure of miner economics as Bitcoin inflation decreases
  3. Inability to scale Bitcoin effectively for widespread adoption
  4. Competition from other cryptocurrencies
  5. Community schisms leading to hard forks
  6. Potential changes to Bitcoin’s monetary policy
  7. Government bans and coordinated attacks
  8. Capture by large financial institutions
  9. Theft and hacking vulnerabilities
  10. Financial attacks exploiting Bitcoin’s economic system
  11. Core software failures or upgrade-related vulnerabilities

Conclusion

As a researcher examining VanEck’s prediction of Bitcoin reaching $2.9 million by 2050, I’d rephrase it this way:

Although the valuation analysis paints a rosy picture for Bitcoin’s future, VanEck cautions that several risks may prevent this from materializing. Overcoming technical, economic, and regulatory hurdles is crucial for Bitcoin to realize its potential as a decentralized, trustless digital currency, while upholding its fundamental value proposition.

Based on my extensive research and analysis in the field of cryptocurrencies, I strongly advise taking VanEck’s $2.9 million Bitcoin price target for 2050 with a grain of salt. As someone who has closely followed the Bitcoin market for years, I understand that such projections are speculative by nature and should not be taken as financial advice or a definitive call to buy or sell Bitcoin.

The cryptocurrency market is known for its instability and unpredictability, meaning the final results could vary greatly from initial projections. It’s essential for investors to diligently research each opportunity, assess their financial circumstances and risk tolerance, and consult with professional financial advisors before making any investment in Bitcoin or other digital currencies.

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2024-07-25 16:04