free page hit counter

On February 19, Bitcoin’s (BTC) market cap surpassed $ 1 trillion for the first time. While this was an exciting moment for investors, it also worried investors that the asset is in a bubble.

While a handful of publicly traded companies have ever achieved this feat, unlike gold, silver and Bitcoin, stocks may generate income, which in turn can be used for buybacks, dividends or developing additional sources of income.

On the other hand, as Bitcoin adoption increases, those same companies will likely be forced to move some of their cash positions to non-inflatable assets, guaranteeing the demand for gold, silver and Bitcoin.

In fact, data shows that diversification between Bitcoin and traditional assets allows for better risk-adjusted performance for investors, which is becoming increasingly difficult for businesses to ignore

Bitcoin continuing to push above the trillion dollar is also easy to overlook, until one compares it to the market cap of other major global assets. To date, less than ten marketable assets have achieved this achievement.

The 20 Most Profitable Companies in the World. Source:

As shown above, the world’s 44 most profitable companies collectively generate more than $ 1 trillion in revenue per year. It should be kept in mind that shareholders may as well reinvest their dividends in stocks, but some of it could end up in Bitcoin.

$ 1 trillion is small compared to real estate markets

Corporate earnings aren’t the only streams that can trickle into scarce digital assets. Some analysts estimate that some real estate investment, especially those that yield less than inflation, will eventually migrate to riskier assets, including Bitcoin.

On the other hand, today’s lucrative real estate asset holders may be willing to diversify. Given the relatively scarce assets available, stocks, commodities and Bitcoin are likely to be the beneficiaries of some of these inflows.

Global real estate markets. Source:

According to the chart above, global agricultural real estate is estimated at $ 27 trillion. The United States Department of Agriculture estimates a return on farm equity at 4.2% for 2020. While this is very raw data, given that agricultural real estate is used in multiple ways, it is very possible that the industry will exceed $ 1 trillion. per year.

Like recently reported According to Cointelegraph, there are 51.9 million people worldwide with a net worth of $ 1 million or more, excluding debt. Despite representing only 1% of the adult population, they collectively own $ 173.3 trillion. Even if those aren’t willing to sell assets in exchange for BTC, an insignificant 0.6% annual return is enough to create $ 1 trillion.

If there is a bubble, Bitcoin is not alone

These numbers confirm that a $ 1 trillion market cap for Bitcoin should not immediately be viewed as a bubble.

Perhaps those Bitcoin maximalists are right and global assets have been heavily inflated due to a lack of scarce and secure options to store wealth. In this case, which is not obvious, a global asset deflation would certainly limit BTC’s upside potential. Unless they somehow think a cryptocurrency can extrapolate global wealth, which seems odd.

Back to a more realistic worldview, the above comparison to stocks, agricultural real estate and global wealth also confirms Ether’s insignificant (ETH) Topical $ 244 billion in capitalization is, let alone the remaining $ 610 billion in altcoins.

Assuming none of the corporate profits or real estate proceeds will be allocated to cryptocurrencies seems unlikely. Meanwhile, an annual inflow of just $ 100 billion for Bitcoin is five times higher than the $ 20.3 billion of newly minted coins per year at the current price of $ 59,500.

For example, $ 100 billion flowing into Bitcoin would be just 5% of the $ 1 trillion annual business dividends and 5% of global wealth or agricultural real estate revenues. While the impact on the $ 11 trillion market cap of gold would be negligible, such allocations would certainly play a critical role in Bitcoin’s path to becoming a multi-trillion-dollar asset.

The views and opinions expressed here are solely those of the author and do not necessarily reflect Cointelegraph’s opinion. Every investment and trade move carries risks. You should do your own research when making a decision.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *