Bitcoin (BTC) has recently attracted a lot of interest from a number of traditional finance companies and individuals such as hedge fund billionaire Paul Tudor Jones. According to Brian Estes, chief investment officer and managing partner of Off the Chain Capital, an investment firm focused on blockchain and digital assets, this could be the start of a new wave of Bitcoin buyers.
“I think at some point all corporate treasuries will have a small part of their reserves in Bitcoin.”Estes told Cointelegraph in an interview.
More and more companies are considering Bitcoin as part of their treasury-fund equation. Two of the youngest providers in the Bitcoin ecosystem, MicroStrategy and Square, recently bought BTC worth approximately $ 425 million and $ 50 million, respectively. “These are two of the Fortune 1000 companies and I think there are 998 left,” said Estes.
In collaboration with several of its partners, Off The Chain analyzed some numbers based on hypothetical scenarios and adjusted the presumed investment capacity of each company to the possible purchases of Bitcoin. “There are $ 4 trillion in treasury reserves in public corporations today,” said Estes. “If only 1% of that is transferred to Bitcoin, it will be $ 40 billion.”
“Because of the multiplier effect for every dollar that flows into Bitcoin, the market capitalization of Bitcoin increases between 20 and 100 US dollars.”Estes explained. “If you buy $ 1 million worth of Bitcoin, Bitcoin’s market cap increases to between $ 20 million and $ 100 million.”
This multiplier effect is related to the availability of funds in the order books on cryptocurrency exchanges, according to David Grider, Director and Senior Research Analyst at Fundstrat. “The reason for this effect is that, as in all markets, the marginal liquidity at the edges determines the price and value of the entire asset base,” Grider told Cointelegraph.
At the lower end of the spectrum Multiplying the estimate of $ 40 billion by 20 would add $ 800 billion to Bitcoin’s market capEstes speculated. This would increase Bitcoin’s market cap from its current $ 222 billion to over $ 1 trillion.
“Conservatively, if 1% of public company treasury reserves went to Bitcoin, Bitcoin would have a market cap of $ 1 trillion, and it could be a market cap of $ 5 trillion if we use that number 100,” explained Estes. “This excludes central banks and other institutions that may be added later.”