Bitwise Chief Investment Officer Matt Hougan said the common mistake in $1 million bitcoin debates is treating the store-of-value market as fixed.

The math behind a $1 million coin

Hougan framed bitcoin as an emerging store-of-value asset competing with gold.

Hougan said the valuation approach is simple:

“Estimate the size of the store-of-value market, estimate bitcoin’s share of that market, and divide by 21 million (the maximum total supply of bitcoin).”

Hougan pegged today’s store-of-value market at just under $38 trillion, consisting of about $36 trillion in gold and $1.4 trillion in bitcoin.

That implies bitcoin is a bit under 4% of the market, he said.

Why gold’s growth matters

Hougan pointed to the launch of the first U.S. gold ETF in 2004, when he said the total gold market was about $2.5 trillion.

He wrote:

“It’s grown to almost $40 trillion over the years—a compound annual growth rate of 13% per year.”

If that growth rate persists, he projected the global store-of-value market could reach about $121 trillion in 10 years.

At that level, he said bitcoin would need roughly 17% market share to reach $1 million per coin.

Risks Hougan flagged

Hougan said the store-of-value market may not keep expanding as it has since 2004, citing the global financial crisis era, quantitative easing, and low rates.

He also said bitcoin could fail to gain market share.

But he added:

“I think there’s equal risk that these projections are too conservative.”