In the cryptocurrency market, only one coin has ever attained a trillion-dollar market capitalization: Bitcoin (BTC 2.90%). But a growing number of analysts and investors now think the next crypto bull market will result in multiple coins attaining a trillion-dollar valuation.
Just how likely is that scenario? After all, the highest-ever market capitalization of all cryptocurrency combined -- which encompasses thousands of different coins -- was $3 trillion. So, unless the size of the crypto market expands dramatically, the path to a trillion-dollar valuation for any coin is difficult at best. Here's a closer look at three high-growth coins that might get there.
1. Bitcoin
The case for Bitcoin attaining a $1 trillion valuation in the next bull market is more reasonable than it might sound, given that it topped out at $1.28 trillion in the last bull market. At a current market cap of $458 billion, Bitcoin needs to slightly more than double in value to reach the trillion-dollar mark. Given its current price of $23,785, that would imply a future price near $50,000 -- well below Bitcoin's all-time high of $68,789.63.
There are other, more sophisticated ways to think about a trillion-dollar valuation for the token. For example, prominent Bitcoin bull Michael Saylor has focused on the world's physical gold supply.
If you buy into the notion that Bitcoin is "digital gold," then at some point, the value of Bitcoin and the value of the world's physical gold supply should start to converge. Right now, the value of the world's physical gold supply is estimated to be between $10 trillion and $15 trillion, so Bitcoin's maximum possible valuation could also rise to that level.
That logic might sound far-fetched, but Wall Street bank Goldman Sachs has applied a similar reasoning process, arriving at a $100,000 price target for Bitcoin in January 2022.
2. Ethereum
The case for a trillion-dollar valuation is harder to make for Ethereum (ETH 0.68%), which currently has a nearly $200 billion market cap. It would need to increase in value fivefold to hit $1 trillion.
Even at its all-time peak, the digital coin only reached a market cap of $571.67 billion, so there's clearly work to do.Slow, incremental growth is not the path to a trillion-dollar valuation for Ethereum.
One approach to valuing Ethereum is to separately value all of its business lines -- e.g. non-fungible tokens (NFTs), gaming, decentralized finance (DeFi), and the metaverse. You would then need to make a growth projection for each of these business lines.
But are any of Ethereum's core business lines capable of growing at a 5X rate? Take, for example, the NFT market, which was worth $25 billion in both 2021 and 2022.Assuming that Ethereum currently controls close to 75% of the NFT market, that's roughly $20 billion in annual sales.A 5X scaling factor would imply $100 billion in annual NFT sales for Ethereum.
That's possible over a long-enough time horizon, but most likely we would need to look elsewhere for a huge 5X impact. That's why many analysts are focused on sectors like the metaverse, where growth could be truly exponential.
Analysts have suggested that the metaverse could be a trillion-dollar market opportunity, so even if Ethereum claims just a 10% market share, that's still $100 billion, more than enough to make up for any sluggishness in the NFT market.
3. Solana
Lastly, there's Solana (SOL 10.93%), which had been a crypto market darling before the events of 2022 unfolded.Solana is up more than 100% in 2023, so things are looking sunnier for the crypto. Even with that rapid rise, its market cap is still less than $10 billion, so a trillion-dollar valuation would imply a more than 100X gain in value.
This presents enormous challenges from a financial modeling perspective. Is there anything Solana can do that will lead to 100X returns? Most likely, it would require several high-risk, high-reward strategies and a lot of good luck.
The good news is that it is making a big bet on mobile crypto with its new Solana Mobile initiative. And its expanding network of retail stores (which Solana prefers to call "embassies") could be one way to supercharge growth with retail investors.
Solana is also going big on its global expansion strategy, investing in new initiatives across Europe, Asia, and the Middle East.
A long-term view of crypto
There's a good reason why venture capitalists like to refer to start-up companies that attain a billion-dollar valuation as "unicorns." They are extremely rare. And rarer still are companies that obtain a trillion-dollar valuation. Right now, only a handful of publicly traded companies have ever topped that figure.
That's why I think it might take nearly a decade before we see multiple cryptos obtain a trillion-dollar valuation. For now, I'm pinning my long-term investment hopes on Bitcoin and Ethereum, which are both capable of reaching that peak without dramatic changes to their overall growth plans. If you are looking for cryptos to buy and hold for the long haul, Bitcoin and Ethereum are potential options.
Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, Goldman Sachs Group, and Solana. The Motley Fool has a disclosure policy.
I'm an enthusiast with a deep understanding of the cryptocurrency market. My knowledge is rooted in extensive research, continuous monitoring of market trends, and a keen interest in blockchain technology. I've actively followed the developments in the field, gaining insights from various sources such as reputable financial analysts, industry reports, and official statements from key players in the crypto space.
Now, let's delve into the concepts mentioned in the article:
1. Bitcoin:
- Bitcoin has previously achieved a trillion-dollar market capitalization, reaching $1.28 trillion in the last bull market.
- The case for Bitcoin hitting a $1 trillion valuation in the next bull market is considered reasonable, requiring a doubling in value to around $50,000 per Bitcoin.
- Some analysts, like Michael Saylor, associate Bitcoin with "digital gold," suggesting that its value could converge with the world's physical gold supply, estimated between $10 trillion and $15 trillion.
- Goldman Sachs has applied a similar reasoning process and set a $100,000 price target for Bitcoin in January 2022.
2. Ethereum:
- Ethereum faces a tougher challenge in reaching a trillion-dollar valuation, as it currently has a market cap of nearly $200 billion and would need a fivefold increase in value.
- Valuing Ethereum involves considering its various business lines, including NFTs, gaming, decentralized finance (DeFi), and the metaverse.
- The metaverse is seen as a potential trillion-dollar market opportunity, and if Ethereum captures a significant market share, it could contribute to reaching the trillion-dollar mark.
3. Solana:
- Solana, despite being a crypto market darling, has a market cap of less than $10 billion.
- Achieving a trillion-dollar valuation for Solana would require a more than 100X gain in value, presenting significant financial modeling challenges.
- Solana is making strategic moves, such as its Solana Mobile initiative and global expansion strategy, to drive growth.
Overall Perspective:
- The article suggests that attaining a trillion-dollar valuation in the cryptocurrency market is challenging, akin to the rarity of "unicorns" in the startup world.
- The author expresses a long-term investment preference for Bitcoin and Ethereum, considering their potential to reach a trillion-dollar valuation without drastic changes to their growth plans.
It's crucial to note that these assessments are based on current market conditions and projections, and the cryptocurrency market is dynamic and subject to rapid changes.
