Bitcoin’s Path to $1M: A VC’s Analysis

Like other VCs, I get many things wrong and some right. But good VCs have a point of view. The following is my best thinking  — no more, no less.

Two disclosures: First, both Alumni Ventures, and I in my personal capacity, own Bitcoin. Second, I trained and was privileged to know Clayton Christensen. I view Bitcoin through Clay’s Disruption Theory Framework.

When I evaluate investment prospects, understanding the size of the opportunity is paramount. It’s about identifying assets that aren’t just promising but are poised to redefine industries and create new paradigms. In this regard, I don’t consider Bitcoin the disruptive alternative to Gold/Silver as a global store of value. Through the lens of disruption theory, underpinned by this analysis , I walk through reasons why Bitcoin could have a path to reaching $1.0 million per coin.

THE EVOLUTION OF STORES OF VALUE

A Historical Perspective

To fully grasp Bitcoin’s disruptive potential, it’s good to remember societies have always found ways to store and preserve wealth. Throughout history, humans have sought reliable means to store value — a way to ensure that the fruits of their labor remain intact over time despite economic fluctuations or societal changes.

For thousands of years, precious metals like gold and silver have been the cornerstone of value storage. Their intrinsic qualities — scarcity, durability, divisibility, and universal recognition — made them ideal for this purpose.

However, storing wealth in precious metals comes with significant challenges. Gold and silver are physical assets that require secure storage solutions, which can be costly and cumbersome. Transporting large quantities is impractical due to their weight and theft risk. Additionally, verifying the purity and authenticity of precious metals can be complex and requires trusting intermediaries.

Fiat Currencies: Government-Backed Money

The introduction of fiat currencies marked a significant evolution in how societies store value. Backed by government decree rather than a physical commodity, fiat money offers convenience and facilitates trade on a scale previously unattainable. It allows for easier exchange of goods and services, credit creation, and complex financial instruments.

Yet fiat currencies have their drawbacks. They are inherently inflationary, as governments typically increase the money supply, leading to a currency devaluation over time. Centralized control means that monetary policy decisions are concentrated in the hands of a few, which can lead to mismanagement or misalignment with the interests of other stakeholders. Moreover, geopolitical tensions and economic instability can significantly impact the value of fiat currencies.

Real Estate: Tangible and Appreciating

Real estate has long been considered a solid store of value due to its tangible nature and potential for appreciation. Property ownership provides utility, whether through personal use or rental income, and historically, real estate values have trended upward, especially in desirable locations.

However, real estate investments come with their own set of challenges. They are inherently illiquid; selling property can be lengthy and complex. High entry costs and maintenance expenses can be prohibitive for many potential investors. Real estate markets are also subject to regional economic conditions and regulatory environments, making them less universally stable as a store of value. And with climate change, asset risk is harder to calculate.

Limitations of Traditional Stores of Value

I could go on through additional alternatives, but each traditional store of value has played a crucial role in economic history, but they all possess inherent limitations. These limitations open the door for a new form of value storage—one that leverages technology to address these challenges. This is where Bitcoin enters the conversation.

BITCOIN THROUGH THE LENS OF DISRUPTION THEORY

Understanding Disruption Theory

Clayton Christensen’s Disruption Theory, articulated in his seminal work “The Innovator’s Dilemma,” explains how simpler, more convenient, and often cheaper technologies can displace established incumbents. Disruptive innovations typically start by targeting a niche market or a segment overlooked by existing players. Over time, these innovations improve and move upmarket, eventually challenging and overtaking industry leaders.

Key characteristics of disruptive technologies include:

Bitcoin epitomizes a disruptive innovation in the financial sector. Here’s how it aligns with Christensen’s theory.

1. Targeting Overlooked Segments

Initially, Bitcoin was adopted by a small group of technologists, libertarians, shady characters, and individuals disillusioned with traditional financial systems — segments largely ignored by mainstream finance. It provided solutions to problems that were not adequately addressed by incumbents, such as the need for decentralized control and resistance to censorship.

2. Offering Unique Value Propositions

Bitcoin introduced groundbreaking features:

These features addressed unmet needs, especially in regions with unstable currencies or restrictive financial policies.

As circulating supplies becomes more scarce (flattening green line), price is likely to increase (purple).

3. Rapid Technological Advancement

Bitcoin’s ecosystem has evolved rapidly:

These advancements have made Bitcoin more user-friendly and secure, facilitating broader adoption.

4. Challenging Established Incumbents

Bitcoin is now challenging traditional stores of value and financial services:

This leaves financial incumbents to face a classic innovator’s dilemma. Traditional banks may resist change due to established practices and risk aversion. Other fear that embracing Bitcoin could undermine their existing profitable services. there’s also some uncertainty and fear about regulatory noncompliance deter in  adopting cryptocurrency solutions. Some institutions are adapting by integrating Bitcoin into their services, while others risk obsolescence by ignoring the disruptive threat.

The Path of Disruption

Bitcoin’s progression follows the disruption trajectory:

According to Disruption Theory, unless incumbents innovate or adapt, they may be displaced by Bitcoin’s growing dominance.

DIMINISHING RISKS TO BITCOIN’S DISRUPTION

While risks to Bitcoin’s ascent exist, many are diminishing as the asset matures.

1. Regulatory Evolution

Early Uncertainties

In its early years, Bitcoin faced significant regulatory uncertainty. Concerns about its use in illicit activities and potential to undermine monetary policies led to skepticism and threats of bans.

Shifting Landscape

Today, regulatory clarity is improving. Governments recognize that outright bans are ineffective and instead are focusing on integrating cryptocurrencies into existing legal frameworks. Regulations are being crafted to prevent misuse while allowing innovation.

For example, the U.S. has seen increasing acceptance, with regulatory bodies providing guidelines for cryptocurrency businesses. Institutional adoption is also pushing regulators to accommodate rather than prohibit Bitcoin. In addition, the Trump administration has articulated a vision to position the United States as the global leader in cryptocurrency custody, aiming to bolster the U.S. dollar’s dominance and enhance Bitcoin’s integration into the financial system.

2. Decentralization as a Fortress

Resistance to Suppression

Bitcoin’s decentralized network makes it resilient to attacks or suppression by any single entity. Its global distribution means that shutting down the network would require coordinated action across all jurisdictions, an impractical endeavor.

As evidence to Bitcoin’s resistance, other blockchains are seeking out its security. An Alumni Ventures investment, Babylon is a platform that enhances the security of Proof-of-Stake (PoS) blockchains by leveraging Bitcoin’s robust security.

Technological Advancements

Advancements like the Lightning Network address scalability issues by enabling faster and cheaper transactions. These improvements enhance user experience and increase Bitcoin’s utility as both a store of value and a medium of exchange.

WHY BITCOIN IS A SUPERIOR STORE OF VALUE

Bitcoin’s design and attributes position it as a superior store of value compared to traditional assets. Let’s delve into the key features that set Bitcoin apart.

1. Scarcity and Durability

Fixed Supply

Bitcoin’s most notable characteristic is its fixed supply cap of 21 million coins. This scarcity is hard-coded into its protocol and is immutable. Unlike fiat currencies, where central banks can increase the money supply, Bitcoin’s supply cannot be altered, ensuring that it is not subject to inflationary pressures from overproduction.

This fixed supply creates a deflationary effect over time, especially as demand increases. As more people adopt Bitcoin, the limited supply contributes to upward price pressure, benefiting holders of the asset.

Digital Durability

As a digital asset, Bitcoin does not physically degrade. It can’t be destroyed by natural disasters, corroded over time, or lost due to physical misplacement (assuming proper digital security practices are followed; although the risk of wallet transmission errors still exists). The blockchain technology underpinning Bitcoin ensures that every transaction and balance is recorded on a decentralized ledger, maintained by a global network of computers. This decentralization provides resilience against failures or attacks on any single point in the network.

2. Portability and Accessibility

Global Transferability

Bitcoin can be sent and received anywhere in the world within minutes, regardless of borders. This is a significant advantage over traditional stores of value. For instance, transferring gold across countries is logistically challenging and subject to customs regulations and fees. International wire transfers of fiat currency can take days and incur high fees, especially across certain corridors.

With Bitcoin, value transfer is seamless and does not require intermediaries. This feature is particularly beneficial in today’s globalized economy, where cross-border transactions are commonplace.

Financial Inclusion

Bitcoin lowers barriers to entry for individuals worldwide to participate in the global economy. All that’s needed is internet access and a digital wallet. This inclusivity is transformative for the unbanked and underbanked populations, who lack access to traditional financial services. Bitcoin empowers these individuals by providing a secure and accessible means to store and transfer wealth.

3. Transparency and Decentralization

Trustless System

Bitcoin operates on a trustless system, meaning participants do not need to trust a central authority or each other to conduct transactions. The blockchain ensures that all transactions are transparent and verifiable by anyone. This openness reduces the risk of fraud and corruption that can occur in centralized systems.

Resistance to Manipulation

Decentralization is one of Bitcoin’s core strengths. No single entity controls the network, making it resistant to censorship, manipulation, and control by governments or organizations. This autonomy protects users from policies that could devalue their assets, such as excessive money printing or capital controls.

It is also not susceptible to counterfeiting  due to its digital and decentralized nature. Each Bitcoin transaction is recorded on a transparent blockchain, verifiable by anyone in real time, eliminating the risk of physical fraud. This trustless verification mechanism ensures Bitcoin’s authenticity, making it a tamper-proof and counterfeit-resistant store of value.

4. Growing Global Adoption

Mainstream Acceptance

Bitcoin’s adoption curve has been steep, with increasing acceptance from individuals, corporations, and even some governments. Major companies like Tesla, MicroStrategy, and Square have added Bitcoin to their balance sheets. Financial institutions are offering Bitcoin-related investment products to clients, recognizing the demand and potential. At the time of this writing, Bitcoin is approaching 2T in market cap (the entire crypto ecosystem is 3.3T), illustrating the amount of liquidity and decentralization that has battle tested Bitcoin since 2009.

Maturation as a Financial Asset

The infrastructure supporting Bitcoin has matured significantly. Regulated exchanges, custodial services, and financial products like futures and ETFs have made Bitcoin more accessible to institutional investors. This maturation reduces volatility and increases confidence in Bitcoin as a legitimate asset class.

OK, LET’S RUN SOME NUMBERS.

To trace Bitcoin’s potential path to $1 million per coin, let’s conduct a hypothetical floor-ceiling analysis based on market sizes and adoption rates.

1. The Floor: Bitcoin as Digital Gold

Capturing Gold’s Market Share

Gold’s market capitalization is approximately $13 trillion. If Bitcoin captured the same market cap, each 21 million Bitcoins would be valued at around $619,000. This scenario considers Bitcoin a digital alternative to gold, benefiting from easier storage, transferability, and divisibility.

Conservative Estimate

Even if Bitcoin captures just half of gold’s market cap, each coin would be worth approximately $309,500. This is a conservative projection, acknowledging gold’s entrenched position and recognizing the shift towards digital assets, especially among younger generations. We also find that disruption leads to market expansion — as simpler, better, cheaper solutions expand markets significantly (example: Netflix market cap is 5x+ the peak of Blockbuster). So while 100% substitution isn’t likely, expanding the “store of value market” is. So, I think a good estimate would include at least a double in market size. I also ignored Silver.

So where do I come out: My back of envelope floor as it continues to disrupt gold and silver is $500K-$1M.

2. The Ceiling: Bitcoin Capturing a Portion of Global Wealth

Total Addressable Market

The total global wealth, encompassing real estate, equities, fiat currencies, and other assets, is estimated to be over $400 trillion. This figure represents the broadest possible market for store-of-value assets.

Optimistic Valuation

If Bitcoin captures 10% of global wealth (if, for example a third of real estate holding bleed into the asset), its market cap would be $40 trillion. Divided by 21 million coins, this results in a price of approximately $1.9 million per Bitcoin. While ambitious, this scenario reflects the potential of Bitcoin becoming a standard for value storage and transfer.

It comes down to this: Do you believe that large holders of wealth: governments, sovereign wealth funds, pension funds, Investment firms, corporations, and the public will eventually (and I repeat eventually) allocate 10% of their wealth to a digital, portable, secure, supply constrained, distributed repository of value?

It seems reasonable.

This analysis also ignores the growth of the world economy. As AI, Robotics, and other profound technologies increase productivity, we can confidently assume the world store of value to increase several percent per year, at least.

So, I like $2M as my upside number.

3. Aligning with Disruption Theory

Clayton Christensen’s theory suggests that disruptive innovations can eventually overtake incumbent technologies by offering superior solutions to unmet needs. Bitcoin’s trajectory aligns with this path, as it continues to improve and capture market share from traditional stores of value.

By addressing limitations of gold (portability, divisibility), fiat currencies (inflation, centralization), and real estate (illiquidity, accessibility), Bitcoin positions itself as a more efficient and effective store of value. This alignment strengthens the argument for its potential to reach $1-$2 million per coin.

DIMINISHING RISKS TO BITCOIN’S DISRUPTION

While risks to Bitcoin’s ascent exist, many are diminishing as the asset matures.

1. Regulatory Evolution

Early Uncertainties

In its early years, Bitcoin faced significant regulatory uncertainty. Concerns about its use in illicit activities and potential to undermine monetary policies led to skepticism and threats of bans.

Shifting Landscape

Today, regulatory clarity is improving. Governments recognize that outright bans are ineffective and instead are focusing on integrating cryptocurrencies into existing legal frameworks. Regulations are being crafted to prevent misuse while allowing innovation.

For example, the U.S. has seen increasing acceptance, with regulatory bodies providing guidelines for cryptocurrency businesses. Institutional adoption is also pushing regulators to accommodate rather than prohibit Bitcoin. In addition, the Trump administration has articulated a vision to position the United States as the global leader in cryptocurrency custody, aiming to bolster the U.S. dollar’s dominance and enhance Bitcoin’s integration into the financial system.

2. Decentralization as a Fortress

Resistance to Suppression

Bitcoin’s decentralized network makes it resilient to attacks or suppression by any single entity. Its global distribution means that shutting down the network would require coordinated action across all jurisdictions, an impractical endeavor.

As evidence to Bitcoin’s resistance, other blockchains are seeking out its security. An Alumni Ventures investment, Babylon is a platform that enhances the security of Proof-of-Stake (PoS) blockchains by leveraging Bitcoin’s robust security.

Technological Advancements

Advancements like the Lightning Network address scalability issues by enabling faster and cheaper transactions. These improvements enhance user experience and increase Bitcoin’s utility as both a store of value and a medium of exchange.

BITCOIN’S RISE WILL LIFT OTHER BOATS

While Bitcoin is at the forefront of the cryptocurrency movement, its rise paves the way for a broader ecosystem of blockchain-based technologies and ventures. The underlying blockchain technology has the potential to revolutionize various industries by enabling new applications such as smart contracts, decentralized finance (DeFi), authentication systems, and more. Let’s explore some of these opportunities.

1. Smart Contracts and Ethereum

Automation of Agreements

Smart contracts are self-executing contracts with the terms directly written into code. They automatically enforce and execute agreements when predefined conditions are met, eliminating the need for intermediaries.

Ethereum’s Pioneering Role

Ethereum, the second-largest cryptocurrency by market cap, introduced smart contract functionality. It provides a decentralized platform where developers can build decentralized applications (dApps). These applications have vast potential across industries:

Investment Opportunities

Investing in platforms that facilitate smart contracts opens up opportunities in a rapidly growing market. As more industries adopt blockchain solutions, the demand for smart contract platforms is expected to surge.

2. Decentralized Finance (DeFi)

Redefining Financial Services

DeFi refers to financial applications built on blockchain technologies that operate without centralized intermediaries. DeFi platforms offer services such as lending, borrowing, insurance, and derivatives trading.

Solana is a high-performance blockchain designed for decentralized applications (dApps) and DeFi. Known for its scalability, Solana achieves lightning-fast transaction speeds and low costs, thanks to its innovative Proof-of-History (PoH) consensus mechanism. These features make Solana ideal for DeFi, enabling seamless trading, lending, and liquidity provision with minimal fees and near-instant finality. Solana’s robust ecosystem provides a fertile ground for DeFi innovation, making it a preferred platform for developers and users seeking efficient, high-throughput financial applications.

Benefits of DeFi

Growth Potential

The DeFi sector has experienced explosive growth, with billions of dollars locked in DeFi protocols. This presents investment opportunities in DeFi platforms, tokens, and supporting infrastructure.

3. Betting Markets and Prediction Platforms

Decentralized Prediction Markets

Blockchain enables the creation of decentralized prediction markets where users can bet on the outcome of events in a transparent and secure manner.

Applications

Advantages

4. Authentication and Trust Systems

Verifiable Credentials

Blockchain can be used to create largely immutable records for identity verification, academic credentials, professional certifications, and more.

Use Cases

Enhancing Trust

By providing transparent and tamper-proof records, blockchain enhances trust between parties, reducing fraud and increasing efficiency.

5. Non-Fungible Tokens (NFTs)

Unique Digital Assets

NFTs represent ownership of unique digital items or content, such as artwork, collectibles, or virtual real estate.

Market Expansion

The NFT market has seen substantial growth, with artists, musicians, and creators monetizing digital content directly.

Investment Opportunities

Investing in NFTs or platforms that facilitate NFT creation and trading offers exposure to a new and expanding market.

6. Enterprise Blockchain Solutions

Corporate Adoption

Businesses are exploring blockchain for various applications, including supply chain management, cross-border payments, and data security.

Consortiums and Partnerships

Enterprises are forming consortiums to develop industry-specific blockchain solutions, such as IBM’s Food Trust or the R3 consortium for financial services.

Market Potential

The enterprise blockchain market is expected to grow significantly, presenting opportunities for investment in technology providers and service companies.

7. Central Bank Digital Currencies (CBDCs)

Government-Issued Digital Money

CBDCs are digital versions of fiat currencies issued by central banks, leveraging blockchain or distributed ledger technology.

Impact on Financial Systems

CBDCs could transform payment systems, monetary policy implementation, and financial inclusion efforts.

Synergy With Cryptocurrency

While CBDCs are centralized, their development legitimizes digital currencies and may facilitate greater acceptance of decentralized cryptocurrencies.

8. Stablecoins

Stablecoins are digital currencies designed to maintain a consistent value by pegging to assets like the U.S. dollar or commodities such as gold. This stability offers several advantages:

These attributes position stablecoins as a bridge between traditional finance and the digital economy, offering stability and efficiency in financial transactions.

YOUTH’S BET ON BITCOIN AND GENERATIONAL WEALTH TRANSFER

1. Economic Realities

Wealth Inequality

Younger generations face economic challenges, including student debt, high housing costs, and stagnant wages. Traditional avenues for wealth accumulation, such as homeownership or stock investments, are less accessible.

2. Cryptocurrency as a Catalyst

Challenging the Status Quo

Bitcoin offers an alternative path to wealth creation and preservation. It allows young people to invest in an asset not controlled by traditional financial institutions or influenced by policies that may not align with their interests.

Embracing Innovation

Millennials and Gen Z are digital natives comfortable with technology. They are more open to adopting digital assets and see Bitcoin as aligned with their values of transparency, decentralization, and empowerment.

3. Resonance with Decentralization

Alignment of Values

Bitcoin’s decentralized nature resonates with a generation skeptical of centralized power structures. The 2008 financial crisis and subsequent economic policies have eroded trust in traditional institutions.

Building a New Financial Future

By embracing Bitcoin, younger generations are actively participating in shaping a new financial system — one that prioritizes individual sovereignty and equitable access.

ACKNOWLEDGING THE RISKS

No analysis is complete without considering potential obstacles. Though I’m optimistic about Bitcoin’s future, it’s crucial to acknowledge the risks.

1. Potential for Government Bans

While a coordinated global ban on Bitcoin is unlikely, individual countries may impose restrictions. Such actions could hinder adoption and limit access. However, history shows that prohibition often drives innovation underground rather than eliminating it.

Bitcoin’s decentralized network makes it difficult to enforce bans effectively. Moreover, as more institutions and individuals adopt Bitcoin, the political and economic costs of banning it increase.

2. Technological Challenges

Bitcoin faces technical risks, including potential vulnerabilities in its code or quantum computing threats. However, the open-source nature of Bitcoin allows for continuous scrutiny and improvement by a global community of developers.

Energy usage is also an issue as Bitcoin mining consumes substantial energy. Transitioning to renewable sources like solar and wind can reduce its carbon footprint and lowers costs, as might new nuclear technologies.

Scalability remains a concern, but ongoing advancements aim to address this issue. The network’s resilience over the past decade demonstrates its robustness and capacity to evolve.

3. Emergence of Superior Competitors

New cryptocurrencies with advanced features could challenge Bitcoin’s dominance. While competition is healthy and drives innovation, Bitcoin’s first-mover advantage, network effects, and brand recognition provide a strong moat.

Bitcoin is often seen as digital gold — a reliable store of value — while other cryptocurrencies may focus on different use cases. This differentiation can allow Bitcoin to maintain its position even as the broader crypto ecosystem evolves.

MY POV: THE GENIE IS OUT OF THE BOTTLE

Bitcoin’s ascent as a dominant global store of value is not just a possibility — it’s a probability supported by technological innovation, market dynamics, and shifting societal values. Its distinct attributes address the limitations of traditional stores of value, offering a compelling alternative in an increasingly digital world.

Moreover, Bitcoin’s rise is lifting other boats, creating a tide of innovation across various sectors through blockchain technology. As these technologies mature, they will unlock new markets and reshape existing ones, presenting unprecedented opportunities for investors and entrepreneurs alike. As venture capitalists, recognizing and investing in these ancillary opportunities is crucial. The technologies and platforms emerging alongside Bitcoin have the potential to generate significant value and reshape the economic landscape.

As someone who evaluates opportunities for a living, I believe that Bitcoin’s path to $1 million per coin can be analytically supported. Economic principles, adoption trends, and a deep understanding of disruption theory support it. The financial landscape is changing, and Bitcoin stands at the forefront of this transformation.

The convergence of technology, finance, and societal change suggests that Bitcoin is disrupting gold and silver as a store of value. I believe it will reach the $1 million mark and its impact on the financial system is likely to grow.

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