Think Bitcoin is in bubble territory? You haven't seen nothing yet, says one cryptocurrency expert, who believes its value needs to surge by about 300 times over the next several years to be considered a legitimate currency or risk retreating into obscurity and obsolescence.
Bitcoin, the No. 1 cryptocurrency, has drawn outsize attention over its parabolic rise—and the recent, brutal plunge it has been enduring in recent trade.
Some market participants, however, make the case that despite its roughly 260% year-to-date rise BTCUSD, +1.82% it has to clear a far more stratospheric value hurdle to evolve into a practical form of money alongside fiat units like the U.S. dollar DXY, -0.23% Europe’s Euro EURUSD, +0.2265% or British pound GBPUSD, +1.4480%
A single bitcoin was worth about $3,568 in recent trade, off lows of the past few days, according to data site Coindesk.com, amid regulatory headwinds in China and critical comments from Wall Street pros like J.P. Morgan Chase & Co.’s CEO Jamie Dimon.
Still, a bitcoin would need to be worth a stunning $1,000,000 to be a bona fide monetary unit, says Iqbal Gandham, U.K managing director at eToro, a trading platform.
In other words, the digital currency would need to see a 300 fold run-up from its current level. To be sure, Gandham isn’t making a prediction; though he believes the currency has the ability to scale such lofty levels, Gandham thinks that bitcoin needs to climb to such a level to be truly viable as a monetary unit.
To understand why is to understand the tiniest component of bitcoin—the Satoshi. Named after the purported creator of bitcoin, Satoshi Nakamoto. A Satoshi is equal to 0.00000001 bitcoin.
Put another way, one bitcoin contains 100 million Satoshis.
Satoshi’s value in dollars equated to $0.0000356819 at last check. Gandham argues that a Satoshi needs to be equivalent to a single penny, which it would when one bitcoin is worth $1,000,000.
“It is the Satoshi with which people will buy a cup of coffee,” Gandham told MarketWatch. He said using bitcoin now to purchase goods and services, as one would with dollars, isn’t feasible because bitcoin hasn’t reached the necessary economies of scale.
“People don’t use a bar of gold to buy things, they use subdivisions of gold,” he said, saying that using bitcoin now to purchase items is like using a bar of gold to purchase a beverage or a meal.
Gandham also said bitcoin really needs to get to that million-dollar mark in the next few years. Some are already wagering that it will get close: John McAfee, founder of his namesake antivirus software company says bitcoin is headed to the $500,000 level within three years.
“It needs to get there in the next few years if it is really going to work,” Gandham said. “People will only spend the subdivision of bitcoin—and you can only spend the subdivision—if they are of reasonable value,” he said.
Bitcoin has been in the buzzy consciousness of average folks for the better part of the past decade. Created at the height of the financial crisis, it has emerged for some as among the clearest alternatives to government-backed currencies.
Bitcoin bulls argue that much of the modern currency world is a product of a manufactured economy, in which central banks print money to boost economic growth, putting bitcoin and other digital currencies, like Ethereum, in position to be considered on par, if not better than, their fiat counterparts in terms of their economic utility.
Against the backdrop of easy-money policies, the Dow Jones Industrial AverageDJIA, +0.29% the S&P 500 index SPX, +0.18% and the Nasdaq Composite Index COMP, +0.30% are all at their highest levels in history, while the 10-year Treasury note TMUBMUSD10Y, +0.76% with prices moving inversely to yields, seeing yields near historic lows.
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