Bitcoin (BTC) has recently garnered a lot of interest from a number of businesses and mainstream individuals, such as billionaire backer Paul Tudor Jones. This could be the start of a new wave of Bitcoin buyers, according to Brian Estes, chief investment officer and managing partner at Off The Chain Capital – an investment firm focused on blockchain and digital assets.
“I think eventually all corporate treasuries will have a small amount of their Bitcoin reserves,” Estes told TBEN in an interview.
A growing number of companies are turning to Bitcoin as part of their cash flow equation. Two of the latest entrants to the Bitcoin ecosystem, MicroStrategy and Square, recently bought around $ 425 million and $ 50 million of BTC, respectively. “These are two of the Fortune 1000 companies and I think there are 998 left,” Estes said.
Working with a number of its partners, Off The Chain analyzed a few numbers based on what-if scenarios, matching each company’s alleged investment capacity with possible Bitcoin purchases. “There is $ 4 trillion in cash reserves in public companies today,” Estes said. “If only 1% of that amount goes to Bitcoin, that’s $ 40 billion.”
“The multiplier effect for every dollar that goes into Bitcoin, Bitcoin goes up somewhere between $ 20 and $ 100 in market cap,” Estes explained. “If there is $ 1 million in Bitcoin purchased, the Bitcoin market cap increases to between $ 20 million and $ 100 million.”
This multiplier effect is linked to the availability of funds on the order books of crypto exchanges, according to senior research analyst and director of Fundstrat, David Grider. “The reason you get this effect is that, like in all markets, it’s the marginal liquidity at the periphery that determines the price and value of the entire asset base,” Grider told TBEN.
At the low end of the spectrum, multiplying the $ 40 billion estimate by twenty would increase Bitcoin’s market cap by $ 800 billion, Estes speculated. This would push Bitcoin’s market capitalization past $ 1 trillion, up from its current valuation of $ 222 billion.
“If 1% of public company cash reserves go into Bitcoin, Bitcoin is a market cap of $ 1 trillion, on the conservative side, and that could be a market cap of $ 5 trillion if we use the number 100” , explained Estes. “That doesn’t count central banks and other institutions that might come in later.”