nEver since Bitcoin hit an all-time high bull run in 2017, there has been speculation about its potential to hit the $1 million mark.
John McAfee, with all his controversial personality and expertise in the tech world, has been at the front-seat, fuelling the $ 1 million BTC price speculation. In fact, he’s part of the reason why bitcoin reached $20,000 in December 2017, thanks to his bold prediction on Twitter in November of the same year.
Well, he didn’t exactly predict that it would be worth the $20,000 but instead claimed that the coin would be worth as much as $500,000 by the end of 2020. Although he didn’t get into the specifics of how he had arrived at that number, the prediction spiked a mass adoption of BTC in 2017, resulting in the bull run.
A few months later, McAfee doubled up the prediction to a $1 million price target. Recently, other notable industry players such as PayPal director & CEO, Wences Caseres, threw in their weight on the prediction, saying it’s possible for BTC to hit $1 million in the next to seven to ten years.
The Critics
Of course, there are a good number of respectable individuals opposed to the idea that bitcoin is a sound investment, leave alone the price prediction. Warren Buffet, the Oracle of Omaha, describes Bitcoin as a store of fear, not a store of value. Others who doubt bitcoins potential include JP Morgan and Chase Bank CEO Jamie Dimon and Paul Krugman, an esteemed economist and columnist for The New York Times.
Despite the harsh skepticism facing Bitcoin’s future, it doesn’t mean it is entirely impossible for the cryptocurrency to grow in value, and even surpass the $1 million mark.
But before that, there are several hurdles the digital currency must overcome to place itself on a path to the highly anticipated price target.
Scaling Problem
For Bitcoin to experience any massive growth, its market capitalization has to grow first. Case in point, since the first real Bitcoin transaction back in 2010, the infamous Pizza purchase, the crypto’s market cap rose by a whopping 2,300%. This happened after a few weeks of increased adoption/transactions by the general public, who were eager to get a piece of this new digital currency. The increased market cap resulted in an increased BTC price from just $0.0025 to $0.06.
Unfortunately, Bitcoin’s block size is insufficient to support the high number of transactions required to boost its market cap and eventually achieve the $1 million target. The actual block size is 1 MB, which often causes sluggish transactions even with the current of $178 billion. Keep in mind that the $1 million BTC argument dictates that the market cap must amount to approximately $16 trillion, an equivalent of 13% of global GDP!
There have been attempts to solve this problem, but its success hasn’t materialized. Two Bitcoin developers created a two-layer solution dubbed the Lightning Network (LN). This off-chain payment tool makes the transfer of BTC funds faster, except that the payment information doesn’t touch the main blockchain unless the transaction link is closed.
Besides, LN doesn’t completely solve the high bitcoin transaction fee problem, which could jeopardize the network’s adoption among the BTC community.
Regulation from External Authorities
In line with the idea that there has to be a massive adoption of BTC to propel it to high price points, the current regulatory environment hasn’t been doing any good to the Bitcoin community. As such, more people are finding it hard to fully invest in Bitcoin, considering the negative reviews from government institutions.
To put into perspective, consider the BitLicense law imposed by the New York State Department of Financial Services (NYSDFS). According to the law, any start-up centered around bitcoin will have to pay an exorbitant fee of about $5,000 to acquire a business permit/license. The worst bit is that it’s not guaranteed that the NYDFS will approve their license request.
On top of that, there are states with varying bitcoin taxation laws, some of which are unfair. In such states, BTC is treated as an asset, thus subject to capital gain tax. The idea behind this is due to the unpredictable volatility of BTC, which. in an ideal case, would result in a bitcoin holder’s net worth increasing if the coins price were to increase in the first place. Consequently, this discourages business owners who would like to accept Bitcoin payments for their products or services.
While the government’s interference is aimed at creating a sound atmosphere in the cryptocurrency space, it doesn’t come out well for people who loved Bitcoin’s decentralized nature. That said, there needs to be a bilateral trust between the Bitcoin community and the government, for the digital currency to reach $1 million in value.
Banking Support
Probably, the major hurdle standing on the way to 1$ million BTC value is the lack of dependable liquidity. If the currency is to be accepted by the masses, they need a reliable option to change their fiat currency to BTC and vice versa.
Unfortunately, in many countries, the central bank bars the subsidiary banks from offering liquidity options to BTC users. Some credit card companies even probit their users from purchasing cryptocurrencies. There have also been numerous cases of frozen accounts for those trading cryptocurrencies.
Such strict laws not only discourage new investors but also causes panic selling among the existing Bitcoin holders, resulting in a bearish run in the crypto market.
The Rationale Behind $ 1 Million BTC Price Prediction
Regardless of the seemingly impossible hurdles to overcome, Bitcoin still stands a chance to come close if not reach the ambitious price target.
Let’s objectively look at some underlying factors that make the price target more of a reality than a speculation
Technological Growth
In the theoretical stages of technological growth and adoption, every new tech solution or tool starts out with an innovator as the pioneer and first user. Gradually, the tool/solution grows and becomes adopted by the first group of people known as early adopters. The early adopters aren’t big in numbers, but the subsequent mid and late adopters are often in large numbers, thus giving the tech solution in the mainstream attention and usage.
Bitcoin by itself is a technological solution which in this case, the majority of the coins are held by the early adopters. These are a small group of people who invested in Bitcoin when it was worth pennies. As such, it’s quite safe to say that Bitcoin hasn’t yet achieved mainstream usage and adoption as spelled out in the developmental stages of technology solutions.
More so, big corporations and the government have realized the importance of blockchain, the underlying cryptocurrency technology, as evident from the launch of Libra ( a digital currency expected to be launched by Facebook, soon).
The cryptocurrency industry as a whole will, therefore, gain public acceptance placing BTC on its path to $1 million.
Cushion Against Financial Crisis
Financial recession often results in loss of wealth among the citizens of the affected country. Bitcoin and another cryptocurrency, therefore, stands as a cushion against unpredicted financial crisis since it lacks a central authority controlling it.
This idea is even more practical in countries such as Zimbabwe and the Philippines, where the local currency has lost much of its value. Bitcoin and other cryptos are an alternative store of value medium, to citizens in such countries.
The higher the number of people safeguarding their wealth in cryptos, the more likely bitcoin will grow market cap and finally achieve a $1 million valuation.
Conclusion
Judging from the past bull run, it’s easy to see why Bitcoin’s future cannot be accurately predicted. There are factors beyond the rational market principles that have and could influence Bitcoin prices, making the coin’s price growth subject to speculations.
Nonetheless, for a stable growth towards high price points, Bitcoins must overcome the setbacks stated above. Only this way, and in combination with factors favoring its growth, will Bitcoin hit and surpass the $1 million price target with little volatility.