Bitcoin‘s initial functionality in the ecosystem was in line with movement. Whether it is with respect to movement between exchanges or utility transactions to acquire goods or services. A recent research report modeled Bitcoin’s price with respect to Irving Fisher’s Equation of Exchange, where BTC’s target addressable market (TAM) was predicted.
The equation of the exchange model is dependent on the theory that the value of each crypto asset should be directly correlated with the dollar volume of the economy it supports. In line with that, to analyze the allocated TAM for crypto assets it is important to understand the on-chain and off-velocity of assets such as Bitcoin. Off-chain velocity is the movement of crypto outside exchanges for utility or services whereas On-chain velocity is the intra-exchange movement of assets.
Now, according to the report, the target addressable market for crypto assets is approximately $212 trillion. The largest use cases include a medium of exchange including all global fiat currencies worth $126 trillion and consumer loans with a global value of $42 trillion.
TAM is categorized into different sectors and we overlooked some of the major ones directly related to Bitcoin.
Medium of Exchange(MoE)
Starting with MoE, it was revealed the current market that is addressable by Bitcoin is $126.8 trillion USD and BTC has penetrated on 0.13 percent of it. Now it was expected of BTC to recoup at least 10 percent of this market in the next 10 years but it is doubtful. The MoE narrative with BTC is depleting and the drop in off-velocity is a prime example. The value of BTC is now more inclined towards speculation rather than an exchange commodity.
Store of Value
TAM for store-of-value currently stood at $7 trillion in the charts and at the moment people stored over $3.8 trillion in the U.S dollar. At the time of writing, Bitcoin accounted for $98.6 billion of the total $7 trillion which is close to 1.4 percent. For Bitcoin, the TAM in SoV could be higher than other sectors considering the holding narrative of the asset.
The majority of BTC at press time has been held for more than 6 months, which indicates that bitcoin holders aren’t using bitcoin for day trading but are rather holding for long-term appreciation. Factors promoting crypto use and adoption as a store of value.
Online transfers accounted for between $3.4 trillion to $4.4 trillion and despite the report’s number of crypto commerce transactions accounting for $6 million daily, the actual number could be drastically high.
According to Chainalysis, darknet trading volume was estimated to be as high as $700 million in 2017 and $600 million in 2018. Hence, the exact TAM at the moment for Bitcoin and other crypto-assets can be hit-or-miss, in spite of the report’s claim to be around 1% for digital assets.
10-year scenario: Bitcoin at $397K?
With various other TAM sectors coming into play such as Reserve Currency, Remittance, Tax Evasion, and Offshore Accounts as well, it was suggested that the total addressable market stood at $212 trillion.
The least percentage expected of Bitcoin to penetrate over the next 10 years was 10 percent of the total TAM, which would take BTC’s valuation up to $397,000.
Now, as mentioned above, some of the major TAM sectors may generate more adoption for Bitcoin and or completely dropdown. It is difficult to assume certain conditions which make it practically impossible to adhere to a certain penetration percentage. Bitcoin may jump up to to $397,000 by 2030, but there is reason to believe why it cannot be more than that or way less.