Chris Burniske – former crypto lead at ARK Invest and a partner at Placeholder, a crypto venture capital partnership based in New York with $150 million in capital under management – believes the market cap of bitcoin will surpass $1 trillion during the next bull market.
At the height of the 2017 crypto rally, during which the bitcoin price hit $20,000, the market capitalization of the crypto market reached highs of $813 billion.
If bitcoin’s capitalization crosses the $1 trillion mark it would mean BTC would trade for over $40,000. This would also be larger than the entire value of the crypto market at its 2017 peak.
— Chris Burniske (@cburniske) April 20, 2019
How Could Bitcoin Hit a $1 Trillion Market Cap?
Like gold and other commodities that appeal to high net worth individuals and institutions, bitcoin would have to evolve into a recognized store of value with proper infrastructure to handle massive inflows of capital. In the near-term, a lot of work may be necessary to further strengthen the infrastructure supporting the asset class.
As Jeff Sprecher, the chairman of the New York Stock Exchange, explained last year in an interview with Fortune, purchasing bitcoin poses problems for institutional buyers:
“Bitcoin does not have a good market structure. Even for Bitcoin, different markets are posting lots of different prices. And you can pay an up to 6% spread to exchange dollars for Bitcoin, meaning Bitcoin needs to rise by as much 6% before you break even,” Sprecher said.
Depending on the progress on the improvement of infrastructure, some investors including billionaire Mike Novogratz believe that what triggers bitcoin to hit a multi-trillion dollar market cap over the long run will likely be the commitment of institutional investors. Previously, speaking to Bloomberg, Novogratz said:
“It won’t go there ($20 trillion) right away. What is going to happen is, one of these intrepid pension funds, somebody who is a market leader, is going to say, you know what? We’ve got custody, Goldman Sachs is involved, Bloomberg has an index I can track my performance against, and they’re going to buy. And all of a sudden, the second guy buys. The same FOMO that you saw in retail [will be demonstrated by institutional investors].”
The narrative of the entrance of institutional investors in the crypto market floated around since 2017 and many investors had remained uncertain whether institutional adoption would happen at a large scale in the crypto market.
But, according to a survey conducted by TRADE Crypto in partnership with BitGo, 94 percent of 150 surveyed endowments in the US have already invested in the crypto market, which would translate to 141 institutional investors.
Morgan Creek Digital, the first pension fund in the US to invest in crypto, asserted 66 percent of investment into Grayscale’s cryptocurrency products came from institutions.
Burniske also noted that unlike 2017, alternative cryptocurrencies like Ethereum, Litecoin, and Binance Coin have actually begun to acquire large valuations and are no longer dwarfed by bitcoin.