In a recent report, asset management firm VanEck has revealed a possible scenario in which Bitcoin could become one of the world's leading reserve currencies.
According to the firm's analysts, Bitcoin could reach a value of $2,9 million per unit by 2050 and, in addition, become one of the most widely adopted global reserve currencies.
VanEck’s optimistic outlook for Bitcoin’s growth and expansion is based on the cryptocurrency’s growing adoption as a global medium of value exchange and reserve asset.
The research, titled “Bitcoin 2050 Valuation Scenarios: Global Medium of Exchange and Reserve Asset”, which was led by Mateo Sigel, head of digital asset research and Patricio Bush, investment and digital asset analyst, details how Bitcoin could establish itself as one of the world's most important reserve currencies, supported by the erosion of trust in current reserve assets and technological evolution that will solve the scalability problems of blockchain technology.
Growing confidence in Bitcoin as a global reserve asset
Confidence in Bitcoin has been on the rise, driven by its unique features that set it apart from traditional fiat currencies and other digital assets. Experts have noted for years that Bitcoin offers immutable property rights and predictable monetary policy, which are aspects that become increasingly attractive in an environment of economic and fiscal uncertainty such as the current one.
In its report, VanEck argued that the main barrier to Bitcoin adoption is related to the scalability issues of its blockchain network. However, it highlighted that this barrier will be overcome with emerging Layer2 (L2) solutions, such as Lightning Network, Stacks and Bitlayer, among others, which significantly improve the functionality of the network, allowing it to become a global financial system capable of meeting the needs of the developing world.
In fact, the report predicts that by 2050, Bitcoin could be used to settle approximately 10% of international trade volume and 5% of domestic trade volume globally.
But the growing adoption of Bitcoin is not only due to its technical characteristics, but also to its qualities in the financial system and the growing loss of confidence in traditional reserve currencies.
According to the VanEck report, rampant deficit spending and short-sighted geopolitical decisions by issuing nations have eroded confidence in currencies such as the US dollar, the euro, the British pound and the Japanese yen. In this context, Bitcoin emerges as an attractive alternative, offering a neutral medium of exchange and a monetary policy that cannot be manipulated by political interests.
“Due to its importance as a store of value, we also anticipate that 85% of BTC will be effectively removed from the circulating supply as investors seek out its store of value properties.”, the report noted.
Changes in the world monetary system
The international monetary system is undergoing a fundamental transformation. Historically, changes in the monetary system have been slow, but we are now witnessing accelerated change. The dollar's share of cross-border payments has been remarkably stable over the past 45 years, but the euro and Japanese yen's shares have declined significantly, VanEck said.
Source: vaneck
On the one hand, the asset management firm's analysts attribute the dollar's stability to credible fiscal policy and a steady share of global GDP. However, the latter's decline in countries considered leaders in the economic sector, such as the United States, the European Union, the United Kingdom and Japan, is catalyzing a shift towards new reserve currencies such as Bitcoin.
Furthermore, the Declining confidence in current reserve currencies, as long-term stores of value, is also driving this shift and enhancing the attractiveness of alternative assets such as cryptocurrencies.
The report highlighted that US dollar-settled trade is stable, while the euro and yen are losing ground in global trade. Since its peak use in the mid-2000s, the euro has declined its share in cross-border payments from 22% to 14,5%, and the yen's foreign exchange reserves have fallen from 6,2% to 5,4% today. These changes are correlated with the decline in relative GDP and rising debt relative to GDP in the EU and Japan.
The long-term growth and appreciation potential of Bitcoin
Another point highlighted in the VanEck report is Bitcoin's significant long-term growth potential.
Based on this potential, the asset management firm projected that by 2050, Bitcoin's total market capitalization could exceed $60 trillion, while the cryptocurrency's unit price could be around $2,9 million per coin, which would represent a 4.200% increase from its current market price.
Source: CoinMarketCap
As mentioned, VanEck's projected growth for Bitcoin over the next 30 years is based on assumptions about global growth, demand for the cryptocurrency from institutional and retail investors, and BTC trading volume on the markets. All of this adoption and growth will drive its appreciation, the analysts said.
On the other hand, the firm believes that lL2 solutions will also play a crucial role in the mass adoption and long-term growth of Bitcoin.By improving the scalability of the blockchain network, these technological solutions will enable higher transaction volumes and greater adoption and use of cryptocurrency, and are therefore also expected to increase in value over time.
VanEck estimates that Bitcoin-based L2 solutions could collectively be worth about $7,6 trillion by 2050, which would represent roughly 12% of Bitcoin’s projected market value by then.
In summary, the VanEck report presents a Optimistic scenario for the future of Bitcoin, highlighting its potential to become one of the most used and valued reserve currencies in the world by 2050. Growing confidence in Bitcoin, changes in the global monetary system, and its long-term growth potential are key factors that will drive its adoption and appreciation in the coming decades.
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