People seem to be continuously shocked as the price of Bitcoin breaks milestone after milestone. Just yesterday it passed $10,000 and then today it has already shot past $11,000 with no sign of slowing down. Conventional wisdom would suggest that it has to stop sometime, and sometime soon. Bitcoin, however, is anything but a conventional asset.
While I certainly think there will be some drops in the price, and maybe some that are very significant, the long term outlook for Bitcoin seems to be extremely good. Just like people today are looking at the price of Bitcoin from a year or two ago and wishing they got involved, people in a few years will be saying the same things about jumping in at $10k (or $11k).
Why Bitcoin is Still Very Undervalued
The standard comparison for Bitcoin is to gold. Gold has been a store of value for thousands of years, and Bitcoin shares many of the same types of characteristics. I won’t get into them all now, but while they aren’t exactly the same, suffice it to say that the comparison of BTC and Gold is a good one. So, if we look at gold as an asset, what can we learn about Bitcoin’s future?
Well, there is an estimated 5.482 billion ounces of gold in the world (mined and unmined). At today’s price of about $1300 per ounce, that puts the market cap at just north of $7 trillion dollars. Bitcoin has 21 million coins that will ever exist, mined and unmined. If you apply a $7 trillion market cap to Bitcoin, each coin should cost about $337,750 (yes, that is Three Hundred and Thirty Seven Dollars).
This is not to say you should mortgage your house and buy Bitcoin. There are risks, big risks. That being said, based on the information we have today, there is little reason to suggest that Bitcoin is at all overpriced. If anything, buying BTC today will seem like the deal of the decade when you look at it in just a few short years.