Bitcoin is experiencing significant benefits due to major economic imbalances, increasing distrust in institutions, fiscal irresponsibility, and a growing debt burden, according to Matthew Sigel of VanEck. VanEck, an asset manager and issuer of Bitcoin (BTC) and Ether (ETH) ETFs, suggests that BTC’s price could reach $2.9 million by 2050, assuming certain significant conditions are met.

The report from VanEck, released on Wednesday, posits that Bitcoin will become a crucial component of the global monetary system in the coming decades. This transition will be driven by rising geopolitical tensions and increasing costs of debt servicing, which are expected to undermine the current financial system. Sigel, head of digital asset research at VanEck and co-author of the report, stated in a CNBC interview that the world is currently experiencing severe economic imbalances, growing distrust in existing institutions, and a trend towards deglobalization.

Sigel attributes these issues to a massive misallocation of capital since the global financial crisis, where G7 governments have excessively used the printing press to finance unachievable goals with borrowed money. He describes Bitcoin as the ultimate hedge against this growing fiscal recklessness.

In the report’s baseline scenario, Bitcoin would evolve into a primary medium of exchange for both local and international trade, accounting for 10% of global trade settlements and 5% of GDP. Furthermore, Bitcoin would gain prominence as a global reserve asset, diminishing the roles of the U.S. dollar, euro, British pound, and Japanese yen, and achieving a 2.5% share in international currency reserves. If VanEck’s predictions hold true, Bitcoin’s value would increase 44-fold, with an annual growth rate of 16% from its current price of just below $65,000, resulting in a market capitalization of $61 trillion. The advancement of layer-2 networks is deemed crucial for overcoming the Bitcoin blockchain’s limitations and scaling issues to make BTC a viable medium of exchange. This sector could be valued at $7.6 trillion by 2050, following the same valuation framework as Ethereum layer 2s.

However, VanEck cautions about potential risks that could hinder Bitcoin’s growth. The increasing energy demands by miners will necessitate innovation, and the revenue from transaction processing must significantly increase to replace the diminishing mining rewards, which are halved every four years, to incentivize miners to maintain the network. Additionally, coordinated efforts by governments to restrict or ban Bitcoin pose a significant threat, along with competition from other cryptocurrencies and the potential for large financial institutions to exert excessive control.

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