Key Points
- VanEck’s Bitcoin valuation scenarios include BTC reaching $2.9 million by 2050.
- Such a price surge could be driven by its adoption as a global medium of exchange and a reserve asset.
VanEck’s crypto research team has recently outlined assumptions for a scenario in which Bitcoin could reach $2.9 million by 2050. Such an impressive price surge would be driven by its adoption as a global medium of exchange and a reserve asset.
Bitcoin at $2.9 Million by 2050
VanEck sees Bitcoin solidifying its position as a key international medium of exchange by 2050, ultimately becoming one of the world’s reserve currencies. This projection has its roots in the anticipated erosion of trust in the current reserve assets.
The firm believes that Bitcoin’s scalability issues which represented the main barrier to mass adoption will be resolved by emerging Layer-2 solutions.
Also, Bitcoin’s combination of immutable property rights and sound money principles with the L2 solutions’ enhanced functionality could enable the creation of a global financial system that’s capable of meeting the developing world’s needs.
According to VanEck, it’s a conceivable idea that by 2050, Bitcoin could be used to settle 10% of the world’s international trade and 5% of the domestic trade. Such a scenario would result in central banks holding 2.5% of their assets in BTC.
Bitcoin reaching $2.9 million by 2050 would imply a total market cap of $61 trillion. VanEck wrote that applying the existing framework for valuing Ethereum L2s, they estimate that Bitcoin L2s could collectively be worth $6.6 trillion, or about 12% of Bitcoin’s total value.
Shifting Trends in the International Monetary System
VanEck continues and examines the current shifting trends in the International Monetary System (IMS). Persistent trends in the IMS favor Bitcoin’s ascension as the world’s economies turn away from current reserve currencies.
The chief driver of this shift would be declines in the relative global GDP of current economic leaders – the US, the EU, the UK, and Japan.
Another catalyst of the changes will be the diminishing confidence in the current reserve currencies and their ability to be long-term stores of value due to deficit spending and short-sighted geopolitical decisions. Also, concerns about property rights guaranteed by the Western monetary and financial systems, especially in the US continue to grow.
All these factors will lead businesses and consumers worldwide to recognize the endemic shortcomings of alternative fiat currencies. In such an environment of uncertainty, there will be a demand for a neutral medium of exchange with immutable property rights and a predictable monetary policy – Bitcoin.
The Decline of the Euro and Yen in Global Trade – Future Trends
VanEck also addressed the fact that trade settled in USD is stable while EUR and JPY continue to fall.
The dollar’s status in international usage has been relatively stable for the time, but currencies such as EURO and YEN have seen their share of global trade settlement fall.
The reduction in cross-border currency settlement and reserves has occurred together with the EU and Japan’s decline in relative GDP, defense spending, and debt to GDP.
VanEck also analyzed the future trends for the main four currencies, regarding 2050 debt and interest rate scenarios.
Here are the projections revealed by VanEck:
- Interest expenses of the four major governments will surge
- There will be a deterioration of property rights
- They will see an increasing use of sanctions
- A new international monetary system is emerging with the Chinese Yuan as beneficiary
- A multi-polar currency system will be in place
Bitcoin as a Reserve Currency
VanEck listed Bitcoin’s properties that make it a useful reserve currency:
- Trustlessness
- Neutrality
- Immutable monetary policy
- Perfect property rights
The firm also offered the main reasons why countries don’t transact in gold:
- Physical inconvenience and logistics
- Lack of flexibility
- Security risks
- Technological and financial integration
VanEck also reveals the velocity of Bitcoin is 2024 which is 25% of its 2018 figure:
The solution is scaling Bitcoin with L2 solutions.
L2s to Scale Bitcoin
The Bitcoin community is trying to scale BTC in a way that offers essential revenue to miners by encouraging more transactions on Bitcoin. Part of this shift will also create minor but crucial changes to Bitcoin’s core software.
The need to scale Bitcoin has resulted in the creation of many solutions that move its value without using its chain. These are the L2 solutions.
The segment off-chain Bitcoin scaling consists of 2 major subcomponents:
- Those using centralized players to create BTC-backed cryptos on other blockchains
- Those who use decentralized systems
VanEck also addresses the Lightning Network which allows off-chain Bitcoin certificates to be created and sent via a user-created network called a Payment Channel.
Users can transact off-chain freely and settle by closing the Payment Channel, finalizing the changes as a single Bitcoin transaction. Payment channels are part of “State Channels,” a broader scaling solution that lets off-chain BTC interact with dApps, with results settled periodically.
Bitcoin Valuation by 2050
VanEck uses a straightforward velocity of money equation incorporating 3 components:
- GDP of local and international trade settled on Bitcoin
- Supply of actively circulating BTC
- Velocity of BTC
VanEck also reveals that in 15 years, Bitcoin has shown remarkable resilience in multiple economic cycles. Their price prediciton of $2.9 million for BTC is for 25 years from now, and it’s based on the assumption that more people will use Bitcoin as a medium of exchange.
They noted that Bitcoin’s future value derives from the widespread idea that it is the ideal currency that can succeed in fewer forms of money. According to VanEck, the memetic value of BTC as sound money is the firmest foundation upon which Bitcoin rests.
