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Although it is growing, our analysis shows that Bitcoin is still in the early stage of monetization and has great potential for appreciation. In our view, Bitcoin's $200 billion market value-or network value-will exceed an order of magnitude in the next ten years, reaching a trillion level.
In the next section, we will discuss the biggest market opportunity for Bitcoin. Consistent with these opportunities, we estimate that by 2025, the market value of Bitcoin may reach $3 trillion.
Bitcoin as a global settlement network
We believe that Bitcoin can become a settlement system for banks and businesses. Unlike traditional settlement systems, the Bitcoin network is global. It cannot review transactions, and its currency cannot be influenced by institutions such as central banks. Bitcoin can be developed as a platform for handling large transactions between financial intermediaries. Today, most U.S. dollar-based international payments must be settled through the Federal Reserve’s Real Time Gross Settlement (RTGS) or Fedwire.
The Bitcoin network supports senders and receivers, avoids the need for mediation and settlement by transaction intermediaries, and can irrevocably settle high-value transactions every few hours. It can facilitate 2,000 global settlement transactions every ten minutes at any time and anywhere. As pointed out in "The Economics of Bitcoin as a Settlement Network", the Bitcoin network can settle a transaction with every other bank in the global 850 bank networks every day. In the United States alone, deposits totaling US$14.7 trillion generate a settlement volume of US$1.3 trillion between banks each year. If we obtain 10% of these settlements, we believe that the scale of the Bitcoin network will be expanded by more than 7 times, from approximately US$200 billion to a value of US$1.5 trillion, as shown in the figure below
Bitcoin as digital gold
As part of the transition to a digital economy, Bitcoin may challenge gold's status as a global store of value. Economic history shows that when the demand for assets increases relative to the supply, assets generate value. Demand is a function of the ability of assets to perform the three functions of currency, namely value storage, medium of exchange, and unit of account.
For thousands of years, the world recognized gold as the most durable form of currency. In the process of natural selection, various commodities compete with each other for dominance until gold develops into a global currency standard. Although gold has always maintained its status as a store of value, its limitations as a medium of exchange and a unit of account began to emerge in the 20th century.
Proponents often refer to Bitcoin as digital gold because it improves many of the characteristics of physical gold. Bitcoin is not only scarce and durable, but it can also be divided, verifiable, portable, and transferable, all of which can avoid the threat of centralization. According to our research, if it takes a 10% share of the physical gold market, the network value of Bitcoin can increase by nearly $1 trillion, as shown in the figure below, which is five times the current base of $200 billion.
Overview of blockchain related data
Source: Coin Metrics Network Data Pro
Before Monday's decline, the indicator rose slightly in the past week. Ethereum (ETH) transaction fees began to rise after the launch of Uniswap's UNI token. After falling to the lowest point in 4 months on September 11, ETH active addresses also rebounded due to UNI. The daily active addresses of Bitcoin (BTC) also remain strong, with an average of 978K in the past week
Highlights
Following Uniswap's launch of the UNI token the day before, the daily trading volume of ETH hit a record high on September 17, reaching 1.41 million.
Source: Coin Metrics Network Data Chart
On September 17, as users sent transactions to Uniswap contracts to claim and trade UNI tokens, the transaction volume sent to Ethereum smart contracts also hit a record high of 915.56K. Since July, as decentralized finance (DeFi) dominates Ethereum activities, the volume of transactions sent to contracts has surged. This signifies that with the continuous development of DeFi, Ethereum is increasingly being used as a smart contract platform.
The chart below shows the daily transaction volume sent to contract and non-contract addresses, using a 7-day moving average.
Source: Coin Metrics Network Data Chart
Therefore, the overall transfer amount of ETH has climbed to the highest level since January 2018. On September 6, the adjusted transfer value of ETH exceeded that of BTC for 7 days. After the launch of UNI, ETH's lead has increased.
Source: Coin Metrics Network Data Chart
market data
After the recent crash and the UNI debut last week, ETH's volatility has recovered. This is significant because it follows a sustained low volatility level not seen since mid-2019. This increase in volatility precedes some major events, namely the launch of the first phase of ETH 2.0, and the more urgent expiration of the rights on September 25.
Source: Coin Metrics market data
The ETH options expiring on Friday constitute an open contract of nearly $450 million. For the option exchange Deribit, this will be the largest expiry date for Ethereum, and Deribit is currently the largest exchange offering these contracts (by open contracts). This event may add additional volatility to price movements throughout the week, because traders want to hedge the risks of these positions, get out of these positions, or may take expected actions in the spot market.
