So because of the recent downward volatility I have been reading a lot of threads and posts about how bitcoin is a bubble and could crash to zero. I have a different theory: bitcoin will one day become a reserve currency!
Right now countries typically hold US Dollars, Gold and Oil in reserves. The amount of these reserves is critical for smaller countries. Bitcoin is not on that list...yet.
According to the World Gold Council, the total value of all gold ever mined is about $7.8 trillion. The oil market is worth $1.7 billion/per year. There are also 1.56 Trillion USD in circulation. At the moment, bitcoin is worth around $145.9 billion.
If bitcoin were to become part of the reserve mix for even small countries, its value would skyrocket. I can easily see it having a market cap in the trillions.
Sure we could very well see BTC being a reserve currency in 10 years or something but do you expect those entire 10 years to be just up without crashes and bear markets?
In my opinion, when the bitcoin becomes the reserve currency, it is not yet certain, because there is still a new currency or another backup, and can also still not acceptable bitcoin in all countries
I do not agree if bitcoin is said to be a reserve currency because the volatility of bitcoin is very high and demand more and more even they are competing to get bitcoin. so bitcoin can not be said as a reserve currency because they are a necessity for us.
But volatility will decrease as more money is moved into Bitcoin. Bitcoins price will be a lot more difficult to move up or down if there is $1 trillion+ in the market. The way I see things happening, is Bitcoin will slowly gain adoption through investors (like it has been), and once an ETF goes life, huge hedge funds will have an opportunity to invest in Bitcoin. This will send the price soaring, and other hedge funds that didn't like Bitcoin will fomo into the exploding market at this point. As time goes on, more people will invest in Bitcoin, others will be able to diversify their retirement portfolios into Bitcoin, and the younger generation will pick Bitcoin over gold or traditional investments.
Eventually, governments will pile into Bitcoin as well to increase/diversify their reserves. North Korea is already doing this, as its estimated they have 10,000+ Bitcoin. Once governments start to buy Bitcoin to add to their reserves, the price will climb even higher and stabilize. There will be a ton of money in the market at this point, and a 1% price movement will be considered huge.
Bitcoin has been decreasing in volatility, as in 2011-2013, the price could move 50% in one day. Now it's a big deal if it moves 10% in one day. That's because the market is much larger now than what it was.