A Trillion Dollar Network by 2025

A Trillion Dollar Network by 2025

Disclaimer: Your capital is at risk. This is not investment advice.

With the bitcoin price dipping below $10,000, it’s a good time to reflect on the longer-term trend.

I want to show you the trendline that has been in place since 2011, and a newer one that dates back to 2015. In my opinion, the former has become resistance while the latter has become support.

Using log charts, we can draw trendlines with a constant IRR. This white line has been rising at a rate of 212% per annum, which means investors have more than trebled their money each year. That’s been a terrific run, but as of last November, bitcoin dropped below it for the first time. What once appeared to be support, has now become resistance. Notice how this line also marked the peak in June 2019.

The trend has broken

Source Bloomberg: Bitcoin in USD since 2011

It is unreasonable to assume that a 212% line continues indefinitely. After all, we’d only need save $100 for a glorious retirement in ten years’ time. Nice idea, but even bitcoin will struggle to repeat such miracles of wealth creation.

Year Return
Year 0 $100
Year 1 $312
Year 2 $973
Year 3 $3,037
Year 4 $9,476
Year 5 $29,565
Year 6 $92,242
Year 7 $287,794
Year 8 $897,918
Year 9 $2,801,505
Year 10 $8,740,694
Annualised Return 212%

In any event, there is still plenty of growth to look forward to, just at a more moderate pace. When the price broke below the white line, it found a new trend, which just so happens to be a continuation of the last bull market. The trend from 2015 to 2017 was steady, rising at 115% per annum. The late price surge didn’t come about until late 2017.

As the price exploded to near $20,000, the trend was still lagging behind at $1,400. That’s 14 hundred, not thousand. To say the market was overextended is an understatement. The bear market in 2018 took the price back down to trend, which was around $3,400 by February 2019.

The new trend is still strong

Source Bloomberg: Bitcoin in USD since 2011
Year Return
Year 0 $100
Year 1 $312
Year 2 $973
Year 3 $994
Year 4 $2,137
Year 5 $4,594
Year 6 $9,877
Year 7 $21,236
Year 8 $45,657
Year 9 $98,163
Year 10 $211,050
Year 11 $453,757
Year 12 $975,577
Year 13 $2,097,490
Year 14 $4,509,604
Year 15 $9,695,649
Annualised Return 115%

Growth rates can go on for long periods of time but will inevitably slowdown as they mature. The implications for this new trendline imply $10,000 bitcoin will remain a theme until late 2020, rising to $20,000 by Feb 2022 and $40,000 by May 2023.

Recall that if (nearly) 18 million coins quadruple in price, more than half a trillion dollars of wealth will be created. That’s more than possible and the network could touch a trillion dollars by 2025. Considerably more wealth creation lies ahead, than has occurred in the past. And as the network matures and enjoys greater adoption, the conversation will change. Institutions will become more open to the idea.

You can’t reasonably expect steep trendlines to continue indefinitely, but you can expect credible assets to keep on moving higher year after year. If you doubt that, then just look at the leading tech stocks which seemingly go from strength to strength. They grow because the internet is an established mega trend; something that bitcoin will enjoy for years to come.