Bitcoin has been the top-performing currency in the world in six of the past seven years, climbing from zero to a value of about $1,190.
But the cryptocurrency isn’t anywhere close to its potential, according to Jeremy Liew, the first investor in Snapchat, and Blockchain CEO and co-founder Peter Smith. In a presentation sent to Business Insider, the duo laid out their case for why it’s reasonable for bitcoin to explode to $500,000 by 2030.
Their argument is based on increased interest in bitcoin, thanks to:
Remittance transfers, or electronic money transfers to foreign countries, have almost doubled over the past 15 years to 0.76% of GDP, data from The World Bank shows.
“Expats sending money home have found in Bitcoin an inexpensive alternative, and we assume that the percentage of Bitcoin-based remittances will sharply increase with greater Bitcoin awareness,” the two say.
Liew and Smith said increased political uncertainty in the UK, US and in developing nations would help elevate the level of interest in bitcoin.
“We believe Bitcoin awareness, high liquidity, ease of transport and continued market outperformance as geopolitical risks mount, will make Bitcoin a strong contender for investment at a consumer and investor level,” the two said.
Liew and Smith believe the percentage of non-cash transactions will climb from 15% to 30% in the next 10 years as the world becomes more connected through smartphones. There’s only a 63% global smartphone penetration and the total number of smartphone users is expected to soar by 1 billion by 2020. GSMA, a trade body that represents the interests of mobile operators worldwide, believes 90% of these users will come from developing countries.
This will make it possible for nearly everyone to have a bank in their pocket, and that should provide a boost for bitcoin as well. Liew and Smith say bitcoin could account for 50% of all of these transactions.
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Here are the basic model drivers that Liew and Smith used:
It’s important to note that a lot could go wrong, too. News surrounding bitcoin has been rather negative as of a late.
China, which is responsible for nearly 100% of trading in bitcoin, has been cracking down on trading. The three biggest exchanges recently announced a 0.2% fee on all transactions, in addition to blocking withdrawals from trading accounts.
Additionally, the US Securities and Exchange Commission rejected two bitcoin exchange-traded funds, and will make a ruling on another one in the future. It’s not expected to be approved. However, Smith thinks bitcoin is still in its early stages.
“The SEC’s ruling wasn’t a surprise to us,” he told Business Insider. “We know that getting this sort of approval is going to take (a potentially long) time,” Smith said. “In the meantime, bitcoin is already simple to buy and hold and, as the asset continues to mature, we’ll continue to see an increase in the development and deployment of surrounding products.”
And while bitcoin hasn’t been granted regulatory approval here in the US, it is catching on elsewhere. On April 1, the cryptocurrency became a legal payment method in Japan.
Another threat to the future of the cryptocurrency is that developers are threatening to set up a “hard fork,” or alternative marketplace for bitcoin. This would result in the split of bitcoin into bitcoin and bitcoin unlimited. However, Smith says not to worry.
“Bitcoin has strong economic incentives to prevent this,” he said. “If the last two years of healthy contention and debate lead to a conclusion, it’s that Bitcoin is incredibly resilient and stable. In fact, the bitcoin Blockchain has operated for 7+ years with no downtime, a feat no other back-end system operating at this scale can claim.”
Anyone interested in bitcoin should also know that the cryptocurrency sees violent price swings that are uncommon among the more traditional currencies. Bitcoin rallied 20% in the first week of 2017 before crashing 35% on word China was cracking down on trading.
The cryptocurrency has regained those losses, and trades up about 25% so far this year.