When I wrote this, Bitcoin’s digital currency hit an all-time higher than $2,400. Less than seven months later, bitcoin’s price has reached 19,000 dollars. Bitcoin has seen amazing gains this decade and many experts wonder – could Bitcoin possibly increase to $1 million?
Why has bitcoin rallied lately?
There are a few potential factors that could be driving the current rally:
- Recently, legislation in Japan allowed retailers to start accepting bitcoin as a legal currency.
- Political uncertainty makes bitcoin feel safer relative to certain currencies. For example, in Venezuela, where the economy is collapsing, bitcoin is being used to buy food.
- Calming of fears that the blockchain (the underlying technology behind bitcoin) could be split, creating two separate currencies.
- Speculation could also be playing a big role. I’m not saying that bitcoin is necessarily in a bubble, but an asset skyrockets in value, people tend to jump in, creating buying pressure and pushing the price even higher.
Could bitcoin rise to $1 million?
Theoretically, yes, even if you consider what that would mean. As of this writing, approximately 16.7 million bitcoins are in circulation. A price of $1 million would translate to a total value of $16.7 trillion for all the existing bitcoins. At present, the total value of Bitcoin is about $318 billion.
Meanwhile, the U.S. money supply (M2), which includes all physical currency, demand deposits, savings accounts, and money market accounts, is roughly $13.5 trillion. And this is just one country’s money supply — Bitcoin, on the other hand, is a truly international currency. In fact, U.S.-based transactions are one of the smallest sources of bitcoin volume. Considering this, the global M2 money supply is estimated to be about $68.7 trillion, expressed in U.S. dollars.
My point is that while bitcoin would have to work a little to become a major player in the global currency market, the total bitcoin market value of $1 million each is not an outlandish amount of money.
Also, consider that going from the current price of around $2,400 to $1 million would be a rather slight gain compared to the gains of the last seven years. In fact, $100 worth of bitcoin bought seven years ago, when bitcoin was worth about $0.003, would be worth about $633 million today, a gain of about 6.300,000 percent. Meanwhile, a jump from $19,000 to $1 million would represent an “only” 5.160 percent gain.
What would need to happen?
Simply put, widespread mainstream acceptance is what needs to happen before bitcoin can reach the $1 million level, or anything close to it.
There are, however, some obstacles preventing the mass market from fully embracing the online currency. Volatility is a big one—-Bitcoin plunged by more than 50 percent on three separate occasions between 2011 and 2014 and is still much more volatile than the currencies of developed nations. There is a solid case to be made that the reasons for the previous crashes are no longer applicable, but the issue of volatility is certainly still at stake.
In addition, bitcoin is widely used for illegal activities, such as drug dealing and ransomware attacks, due to its anonymous nature.
Even so, there are many in the industry who are optimistic about this. For example, Wences Casares, a member of PayPal’s board of directors and CEO of Bitcoin wallet Xapo, has notably predicted that Bitcoin will hit $1 million in 10 years.
Others have even gone so far as to say that bitcoin could eventually replace gold as a safe haven or become a major reserve currency.
However, bear in mind that any prediction of the future Bitcoin price is very speculative right now. There are a lot of things that need to go right for bitcoin before a million-dollar valuation is possible, so keep that in mind before you decide to put a large amount of your hard-earned money in your digital currency.