Bitcoin’s $1.3 trillion market cap reflects heightened interest despite regulatory scrutiny

• Bitcoin community bullish on $56 trillion potential in 10 years
• Regulatory approvals and institutional interest fuel growth
• Skeptics concerned about viability

Bitcoin’s ascent to $1.3 trillion market capitalisation is testament to global investor fervour surrounding the cryptocurrency, despite regulatory scrutiny and lingering viability concerns. 

Bitcoin soared to all-time highs this March, propelled by the introduction of US spot Bitcoin exchange-traded funds (ETFs) and anticipation of the halving event in April. Bitcoin’s mining rewards will be halved in mid-April, reducing the current limit of 900 bitcoin per day to 450.

From $62,337.27 on 1 March, Bitcoin hit a record $71,500 on 11 March. Although Bitcoin experienced a slight retreat following its peak, it remained relatively high compared to previous levels. As of 2 April, Bitcoin was trading above $67,000 per coin, according to data from CoinMarketCap. The global crypto market cap surged to $2.59 trillion as of 2 April.

Bitcoin community bullish on $56 trillion potential in 10 years

Salahuddin Khawaja, founder and CEO of Hypermode, a New York-based Bitcoin-only company, said: “As Bitcoin goes through this correction, keep the big picture in mind—the ups are much more than the drops. Bitcoin is moving exponentially. As it takes many steps ahead, it sometimes takes a few steps back.” 

He added: “We live in the Bitcoin era, and it presents a massive opportunity. It’s a $56 trillion opportunity.” Describing it as “the best-performing asset” the former managing director for automation at Bank of America Merrill Lynch envisions a monumental $56 trillion opportunity linked to Bitcoin by 2034, lauding it for its rapid ascent to a trillion-dollar market cap in just 12 years. Khawaja has 20 years of experience on Wall Street with Deloitte, JP Morgan and Bank of America, working on technology initiatives.

Bitcoin, currently representing only 0.1% of the estimated $850 trillion in global wealth, holds vast growth potential, with a conservative estimate projecting a 5% market share by 2034. Comparing Bitcoin’s $1.3 trillion market cap to industry titans like Berkshire Hathaway ($790 billion), Google ($1.8 trillion), Apple ($2.9 trillion), and even gold ($13.6 trillion), Khawaja underscores its emergence as a financial powerhouse. 

He said: “That 5% translates to $56 trillion over the next 10 years. That’s how big of an asset this could be. Will it be closer to $20 trillion or $100 trillion? $56 trillion falls somewhere in the middle.”

Khawaja explains the evolution of human transactions as a series of ledger advancements, starting with memory as ledger 1.0, writing as ledger 2.0, coins as money 1.0, paper currency as money 2.0, and banking as ledger 3.0. Khawaja proposes that Bitcoin represents both money 4.0 and ledger 4.0, embodying the pinnacle of financial innovation and simplifying understanding of this complex technology. He also emphasised Bitcoin’s decentralised nature and unique attributes like deflationary tendencies and self-custody capabilities. 

Salahuddin Khawaja,Founder and CEO of Hypermode

Regulatory approvals and institutional interest fuel growth

Since mid-January, Bitcoin’s upward trend has been linked to the US Securities and Exchange Commission’s approval of spot Bitcoin exchange-traded product (ETP). 

US SEC chairman Gary Gensler has raised caution around Bitcoin and crypto-related products, citing their speculative nature and association with illicit activities. While spot bitcoin ETFs have been approved for listing and trading, investors are advised to consider the associated risks. 

In the Philippines, the Bangko Sentral ng Pilipinas (BSP) highlights the diverse ecosystem of Bitcoin buyers and sellers, including institutional investors, businesses, enterprises, and virtual asset service providers (VASPs).  

BSP said: “Bitcoin’s impact on the global and domestic VASP landscape has yet to unfold. BSP will continue monitoring developments related to virtual assets and VASPs in the aspects of money laundering, cybersecurity, and consumer protection risks, as well as other key considerations.”

Former BSP governor Felipe M Medalla sees Bitcoin as a trillion-dollar opportunity, should virtual assets capture even a fraction of gold’s value.

Bitcoin traders are observing a renewed interest in comparing gold to Bitcoin, especially notable as Bitcoin’s price has surged by 40% in a month. This surge aligns with the introduction of spot Bitcoin ETFs in the US, which has attracted substantial investments. However, there are indications that the momentum behind Bitcoin’s rally may be slowing down.

Morgan Stanley is reportedly considering introducing spot bitcoin ETFs on its broker-dealer platform, indicating a rise in institutional investor interest.

Regulatory scrutiny remains a key concern, as exemplified by legal challenges faced by leading cryptocurrency exchange Binance in November 2023. However, Catherine Chen of Binance remains optimistic, emphasising the market demand for cryptocurrencies and the diminishing gap between traditional and digital assets. 

Chen said: “As cryptocurrencies continue to gain acceptance, we are committed to bringing the best-in-class experience for high-volume and sophisticated users. The successful listing of bitcoin spot ETFs and their inflows not only demonstrates that there is clear market demand for cryptocurrencies; it also shows any gap between traditional and digital assets is closing.”

Skeptics concerned about viability

Despite Bitcoin’s staggering market capitalisation, scepticism persists among experts regarding its long-term viability. 

Ulrich Bindseil, director general of market infrastructure and payments at the European Central Bank, along with his colleague Jürgen Schaaf, an adviser, express doubts about Bitcoin’s long-term viability, citing limited legitimate use and volatility. They caution against overestimating the significance of spot ETFs, stating that Bitcoin’s fair value remains contentious and its cyclical nature poses risks.

Bindseil said: “For society, a renewed boom-bust cycle of Bitcoin is a dire perspective. And the collateral damage will be massive, including the environmental damage and the ultimate redistribution of wealth at the expense of the less sophisticated.” 

The Bitcoin halving, occurring roughly every four years or after every 210,000 blocks are mined, marks a significant event in the cryptocurrency realm. This process entails cutting mining rewards in half, posing challenges despite its scheduled nature. Initially set at 50 bitcoins per block, this reward diminishes by half for every 210,000 blocks mined. This reduction has transpired three times since Bitcoin's inception: first to 25 BTC in 2012, then to 12.5 BTC in 2016, and finally to 6.25 BTC in the most recent halving in 2020.

As Bitcoin continues to assert its influence, it prompts closer examination of its impact on financial markets and regulatory landscapes. This necessitates a vigilant approach from investors to navigate the evolving landscape effectively.