Crypto

Bitwise CIO Matthew Hougan believes that investors are “still early” until Bitcoin (BTC) claims the  $500,000 price zone for Bitcoin (BTC).

In a recent investor note, Hougan highlighted that the current environment makes him feel that the $100,000 mark could be “right around the corner.”

Bitcoin registered a new all-time high of $93,523.65 on Nov. 13, marking its best day in history and a 130% year-to-date gain.

Despite the recent surge, Hougan reassured investors who might feel they have missed their chance to invest, explaining why the $500,000 threshold is a significant benchmark for measuring Bitcoin’s market maturity.

‘Still early’

One of the key factors Hougan pointed to in his analysis is the growing demand for store-of-value assets, such as Bitcoin and gold.

As government debts rise and currencies face pressure, more investors are turning to these assets as a hedge. Hougan also noted that Bitcoin’s increasing acceptance as a store of value, similar to gold, marks a major milestone.

“A mature store-of-value asset looks like gold. No one bats an eye when institutions allocate to gold or when central banks invest billions from their balance sheets. You don’t read a ton of skeptical media stories about gold or see sitting U.S. senators building anti-gold armies. Gold has ‘made it.’”

However, Bitcoin remains a pioneering and volatile asset. Investors, such as pension funds and endowments, continue to treat it with caution, and regulatory agencies, including the U.S. Department of Labor, urge “extreme care” when considering Bitcoin investments.

$500k BTC

The $500,000 target for Bitcoin is based on the current store-of-value market, which totals about $20 trillion, including gold and Bitcoin. With roughly 20 million BTC in circulation today, reaching a price of $500,000 would require Bitcoin to capture half of that market, signaling its maturity as an asset class.

In August 2022, Gemini co-founders Tyler and Cameron Winklevoss published an article arguing that Bitcoin could reach $500,000 when more investors recognize its value as a robust inflation hedge.

According to the Winklevoss brothers, Bitcoin’s fixed supply of 21 million coins ensures scarcity, while its decentralized nature offers security and protection against physical seizure. These characteristics, they argued, position Bitcoin as a potential “gold 2.0.”

The Winklevoss twins also pointed out that oil, gold, and the U.S. dollar are poor inflation hedges. Oil is volatile and vulnerable to geopolitical and economic forces. Gold, while stable, has limitations, such as transportation challenges, susceptibility to confiscation, and limited supply growth.

Meanwhile, the US dollar suffers from depreciation as the Federal Reserve increases the money supply, eroding its purchasing power over time.

Furthermore, the Gemini co-founders pointed out that oil, gold, and US dollars fail as means of inflation protection. 

Path to adoption

For Bitcoin to reach the $500,000 mark, Hougan emphasized that broad institutional adoption, particularly from central banks, will be crucial. Currently, central banks hold about 20% of the world’s gold reserves but less than 2% of global Bitcoin holdings.

Hougan highlighted legislative efforts, such as Senator Cynthia Lummis’s proposal for a U.S. national Bitcoin reserve, as signs of progress. He believes that as central banks increase their Bitcoin holdings, the cryptocurrency will move closer to the $500,000 price target.

Hougan also expressed optimism that Bitcoin could eventually surpass $500,000, possibly reaching $1 million, as both adoption and demand for stores of value increase, particularly in response to mounting government debt and currency inflation.

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