On February 19, Bitcoin (BTC) market cap exceeded $ 1 trillion for the first time. Although it was an exciting moment for investors, it also worried investors that the asset was in a bubble.
While a few listed companies have achieved this milestone, unlike gold, silver and bitcoin, stocks are likely to be profitable, which in turn can be used to repurchase, distribute profits, or develop additional income sources.
On the other hand, as Bitcoin adoption grows, the same companies will likely have to shift some of their cash positions to non-inflatable assets, which will create demand for gold, silver and bitcoin.
In fact, the data shows that diversifying between Bitcoin and traditional assets provides better risk-adjusted performance for investors, which is becoming increasingly difficult for companies to ignore.
Bitcoin, which continues to cross trillions of dollars, is also easily overlooked until you compare it to the market value of other important global assets. To date, fewer than ten marketable assets have reached this level.
The 20 most profitable companies in the world. Source: fortune.com
As explained above, 44 for-profit companies in the world generate over $ 1 trillion in revenue annually. It should be borne in mind that shareholders may reinvest dividends into shares, but some of them may end up in bitcoins.
A trillion dollars is small compared to the real estate market
Business profits aren’t the only streams that can end up in scarce digital assets. Some analysts estimate that some real estate investments, especially those with low inflation, will eventually go to riskier assets, including Bitcoin.
On the other hand, profitable property owners may be ready to diversify. Given the relatively scarce assets available, stocks, commodities, and bitcoin are likely to benefit from some of this influx.
Global real estate markets. Source: visualcapitalist.com
According to the graph above, the global agricultural holdings are valued at $ 27 trillion. The USDA estimates the return on equity in agriculture at 4.2% by 2020. Although this is very crude data, given farm real estate can be used in many different ways, the sector is likely to generate more than $ 1 trillion annually.
As Cointelegraph recently reported, there are 51.9 million people worldwide with a net worth of $ 1 million or more, without debt. Although they only make up 1% of the adult population, they own a total of $ 173.3 trillion. Even if they don’t want to sell the assets for BTC, a small 0.6% annual return is enough to generate $ 1 trillion.
If it’s a bubble, Bitcoin isn’t alone
These numbers confirm that the $ 1 trillion bitcoin market should not be seen as a bubble right away.
Perhaps these bitcoin extremists are right, and global assets have swelled dramatically due to the lack of scarce and safe options for storing wealth. In this case, which does not seem clear, deflation on the entire asset will definitely limit the potential for a BTC to increase. Unless they thought the cryptocurrency could extrapolate global wealth, which sounds strange.
Returning to a more realistic view of the world, the aforementioned comparison with stocks, agricultural real estate and global wealth also underscores just how small the current capitalization of $ 244 billion Ether (ETH) is, not to mention the remaining $ 610 billion in altcoins.
It seems unlikely to assume that neither corporate profits nor real estate income is shared with the cryptocurrency. Meanwhile, the annual inflow of bitcoin is only $ 100 billion, five times the annual supply of new coins of $ 20.3 billion at the current price of $ 59,500.
For example, the $ 100 billion that goes into Bitcoin will make up only 5% of the company’s annual $ 1 trillion profit and 5% of global wealth income or farm holdings. While the impact of the $ 11 billion market value in gold would be negligible, such an allocation would certainly play a significant role in Bitcoin’s path to becoming a multi-billion dollar asset.