Why Bitcoin Could Reach $1 Million?
One reason it can reach $1 million is because it is a better store of value.
Bitcoin is money, but it is not just money, it is also an asset. Therefore, Bitcoin's competitors are not only the currencies of various countries, but also all asset categories that have the function of storing value, including gold, stocks, real estate, bonds, collectibles, etc.
The fundamental reason why there is a need to store value is that the fiat currencies issued by various countries are characterized by unlimited supply: although they are stable in the short term, they will definitely depreciate in the long term, making the value storage performance very poor.
Taking the US dollar as an example, the price of a single McDonald's Big Mac in the 1970s was 65 cents, and the average price now is $5.29 - the 65 cents back then can still be spent now, but the value it represents is shrinking.
Therefore, people have to preserve value through other forms of assets, such as buying houses and stocks.
However, these different types of assets are also in a competitive market, and assets with better value storage functions will ultimately win.
The 21st century is the era of digital information. A large number of items in our lives (such as alarm clocks, calculators, cameras, etc.) have undergone a "dematerialization" process and turned into digital information; in the same way, the 21st century also needs a digital solution for value storage - Bitcoin.
Due to space limitations, in this note we will only look at the relative advantages of Bitcoin from the perspective of "scarcity": money can be printed, gold can be mined, houses can be built, and stocks can be issued, but the total amount of Bitcoin is capped. It is the only asset with "absolute scarcity". This feature determines Bitcoin's excellent return on investment: the average CAGR (compound annual growth rate) is 44%, far exceeding the 5.7% of other assets.
Another indicator to measure Bitcoin's long-term value storage performance is the "200WMA", or "200-week price average": since 2012, the 200WMA has been steadily rising; in other words, even if Bitcoin has experienced four price corrections of up to 70%-90%, as long as you buy it at any time and hold it for four years, you will only make money and not lose money.
As more people realize the long-term value of Bitcoin, we can expect Bitcoin to siphon funds away from other assets: we can't expect people to sell their homes to buy Bitcoin, but redundant properties that are too taxed or expensive to maintain may be sold. Similarly, other assets that perform poorly as a store of value may also be allocated to Bitcoin.
As of now, Bitcoin currently accounts for only 0.1% of the world's total assets (see figure); in order to reach 1 million US dollars, Bitcoin needs to capture about 3%. There is indeed a long way to go, but this day will most likely come eventually.
