In ARK’s most recent investment research report, the investment fund predicted that Bitcoin could reach a $1.36 million price target by 2030.
Ultimately, I believe a $1 million price target is an ambitious, yet achievable target, and we can set that as a possible ceiling.
ARK’s claim that Bitcoin will reach a +$1 million price level is based on the assumption that it will penetrate various markets to a certain degree.
ARK Invest believes Bitcoin’s total market cap could grow to $28.5 trillion by 2025.
According to a market research study published by Allied Market, this market should reach $1,227.22 billion by 2028, and the ARK’s estimate for 2030 is $600 billion.
While the lightning network substantially reduces Bitcoin’s fees and increases speed, there are numerous cryptocurrencies out there that are built to be faster and cheaper.
I would say that Crypto, in general, can take 50% of the market, but Bitcoin would only represent perhaps half of this.
China’s GDP should account for $26.5 trillion and would be the world’s largest economy at this point.
However, it is important to consider that developing nations tend to have much lower ratios, given that a lot more of the economy is unbanked or delinked from the financial system.
ARK’s estimate of Bitcoin accounting for 10% of this would give us a total of $3.4 trillion using these numbers, while their estimate is $2.8 trillion, not so far off.
So far, this experiment hasn’t worked too well it seems. A recent report stated that 86% of El Salvadorian businesses still hadn’t conducted a transaction in Bitcoin.
There are still numerous problems with using Bitcoin for day-to-day transactions, but the technology is getting there.
It is not stated in the report where ARK gets its source for this part, but, in any case, the data I found suggests a larger market cap.
Even if Bitcoin is regarded as a store of value, like gold, it doesn’t mean banks would choose it as a settlement vehicle.
Specifically, the article points to the fact that during the Bitcoin bull market, the effect of money flowing into Bitcoin was amplified by anywhere from 2-25x.
Now, according to the link provided by ARK, total nation-state reserves, including gold, were worth around $15 trillion in 2020.
However, this wouldn’t make so much sense in a more mature and established market, where Bitcoin is held as a reserve due to its stability and store of value characteristics.
ARK’s figure implies total cash of $3.36 trillion, so either their source is different or they have applied a growth rate this time.
I’m going to go ahead and apply last year’s growth rate, 4%, and use the 2x multiplier, but I will keep the 5% Bitcoin reserve ratio.
Given the historical growth of the market rate, this seems reasonable, so let’s assume AuM grows by 7% from 2020 to 2030.
I’m going to go ahead and use a 3% adoption rate.
As attitudes towards digital assets in general and Bitcoin, in particular, improve, driven by increased regulatory and compliance clarity as well as a maturing market infrastructure, we consider an estimate of 3% of all hedge fund assets into Bitcoin over the next 5 years as conservative.
That is already accounting for the fact that Bitcoin is acting as “digital gold”, so I feel that adding this market cap is double counting.
In conclusion, I find myself agreeing in principle with ARK’s bullish outlook, but my analysis does differ in some aspects.
Of course, ten-year forecasts are a challenging endeavor, but I do sincerely believe that this is a reasonable price target for Bitcoin.
Disclosure: I/we have a beneficial long position in the shares of BTC-USD either through stock ownership, options, or other derivatives.