Bitcoin: a giant price increase for the President of El Salvador
Bitcoin: a giant price increase for the President of El Salvador
Bitcoin

Bitcoin: a giant price increase for the President of El Salvador

By Marco Cavicchioli - 1 Feb 2022

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Nayib Bukele, the President of El Salvador, expects a giant price increase for Bitcoin

The analysis of the President of El Salvador on the price of Bitcoin

Bukele reports that there are more than 50 million millionaires in the world, meaning people whose wealth exceeds $1 million in total value.

Imagining that each of them decided to own at least 1 Bitcoin, there would not be enough BTC for even half of them, as there will only ever be a maximum of 21 million BTC. 

For this reason, Bukele writes: 

“A gigantic price increase is just a matter of time”.

In reality, however, this reasoning has two unclear, if not incorrect, points. 

The first one is that it is by no means certain that all millionaires in the world want to have 1 BTC. 

More so, on the one hand it is by no means even said that the vast majority of the world’s millionaires want to own Bitcoin, and on the other hand, those who decide to do so may well want to settle for a few fractions of BTC. 

Furthermore, while there will only ever be 21 million BTC, there will only ever be 2.1 million billion Satoshi. In fact every single BTC can be divided into one hundred million Satoshi (Sat), so in total there will always be Satoshi for everyone. 

Nayib Bukele
Nayib Bukele

The sense of reasoning

Despite these two unclear points, Bukele’s reasoning might still make sense, because if globally a significant number of people with high wealth decided to invest even a small part of their wealth in Bitcoin, the price could go up a lot from current levels. 

To make this argument, it is worth taking the market capitalization as a reference, and comparing it to that of other assets for which there is demand from high net worth holders. 

The current market capitalization of Bitcoin is approximately $730 billion, which is a little less than that of Meta (formerly Facebook) and a little more than that of Berkshire Hathaway (Warren Buffett’s company). Amazon stock for example has a capitalization that is about twice that of Bitcoin. 

As far as fiat currencies are concerned, Bitcoin’s market capitalization is slightly less than that of the Russian ruble, and about half that of the Brazilian real. 

But the most interesting comparison is probably with gold and silver. In fact, silver’s market capitalization is about $1.2 trillion, while gold’s is over $11 trillion

If Bitcoin were to capitalize as much as silver – which has already happened in the past few months – its price would be 64% higher than the current one, and if it were to capitalize as much as gold it would have to increase by 15 times compared to current levels. 

Therefore, the scenario of a “gigantic increase” in the price of Bitcoin in the future is absolutely possible, at least in theory, although it is extremely difficult to quantify the real probability. 

To date, it is probably excessive to define such a scenario as “just a matter of time”, as Bukele does, but nevertheless it does not turn out to be an impossible scenario at all. 

 

Marco Cavicchioli

Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".

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