An Expert Shares the Truth Behind Bitcoin's All-Time Highs

Understanding the market cap of bitcoin and the TAM of the world's wealth reveals that bitcoin currently holds 0.504 per cent of worldwide wealth

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The CEO and founder of Out Of This World Investments holds extensive information surrounding bitcoin and more information will be released on a regular basis on his website. Having vast knowledge about the bitcoin market, he says that it’s understandable to feel that the price of Bitcoin at the moment is incredibly high due to the fact that throughout 2021, the price of BTC has been hitting ATH (all-time highs). Seeing a high number can easily give the impression that something is too expensive to buy. However, breaking an asset down into its smaller denominations may help to highlight its true cost. For example, although petrol costs £4,200, if you base the price on a full 3000-litre lorry load, looking at the price in terms of litres helps give a realistic assessment of cost.

Another example is the price of gold. Of course, £42,000 for a kilo can easily be considered a lot of money, but breaking it down into smaller denominations is how most people would use it. For instance, a kilo can be broken down into 1,000 grams; therefore, the price of 1 gram of gold seems significantly more affordable (£42). It’s even possible to break it down into 1,000,000 milligrams meaning the price would be £0.042.

Likewise, with both gold and fuel, 1 whole bitcoin can be broken down into smaller amounts. The smaller denominations are called Millibits (mBTC), Microbits (uBTC) and Satoshi’s (Sats). Thus, it is possible to buy 0.1 bitcoin, 0.000001 bitcoin or even 0.00000001 bitcoin.

Another aspect that is involved in this discussion regarding the price of bitcoin is how one tries to understand it. Firstly, it’s important to note that there will only ever be 21,000,000 bitcoin due to the way it was designed. To discover its market cap (total value of the bitcoin market), we multiply it by the current price of 1 bitcoin (\$60,000 x 21,000,00 = 1,260,000,000,000).

The next step is to evaluate what Bitcoin is designed to be. There have been many discussions based on this, but money is probably the most applicable to keep it simple. With this information, calculating what the TAM (Total Addressable Market) is will further help with understanding what the price of bitcoin is by understanding how much wealth there is in the world. Based on several sources, it is stated that the TAM of the world is roughly \$250 trillion which increases each day.

Therefore, understanding the market cap of bitcoin and the TAM of the world’s wealth, reveals that bitcoin currently holds 0.504 per cent of worldwide wealth. As this continues to increase, the growth of this new asset will continue also. For example, if the percentage doubled to 1.008 per cent then the price of a single bitcoin would be \$120,000. Ultimately though, it’s important to highlight that bitcoin has the potential to grow in a similar pattern as other technological inventions - and if it does, the price of it is incredibly low and affordable compared to what it will be in 5 to 10 years.

Another thing to point out here is that we tend to measure Bitcoin prices against currencies that are not fixed in supply. Each year, more dollars, pounds, and euros are created, but the amount of Bitcoin does not go up. This means that the price of bitcoin in dollar, pound, or euro terms can go up simply because it’s a deflationary currency being measured by inflationary ones.

The founder became so interested in Bitcoin primarily down to the fact that when he created a successful company, he had a huge cash balance to utilize. He started to look for ways to protect the purchasing power (Purchasing power is basically how much of something a currency can buy).

We all know that the price of our favorite chocolate bar or fuel is always increasing, for example, but this is not the “price going up” as such. It’s more about the currency we are buying the product with is losing its value because it’s inflated. In Bitcoin terms, the product has gotten cheaper year after year. Bitcoin has protected purchasing power since it was created in 2008. This is what it was designed to do. It’s programmed to do this at its very core and many people argue its inception was a reaction to the 2008 financial crisis which incompetent leaders caused.

To learn more about his story, Bitcoin, and some of the best startups trying to tackle the world's biggest problems using technology, visit his website, Out of This World Investments.

Note: Investment in cryptocurrency is subject to risk and readers should do their own due diligence. Entrepreneur Media does not endorse any such investment.