Investment manager VanEck foresees Bitcoin potentially hitting $61 trillion in total market capitalization — or some $2.9 million per coin — in 2050 as a result of massive demand for the decentralized currency as collateral for trade settlement and a reserve for central banks, according to a July 24 report. 

“It is conceivable that by 2050 Bitcoin could be used to settle 10% of the globe’s international trade and 5% of the world’s domestic trade,” VanEck said in the report . “This scenario would result in central banks holding 2.5% of their assets in BTC.”

VanEck adds that scaling solutions for Bitcoin’s blockchain network — Bitcoin layer 2s (L2s) — could collectively be worth approximately $7.6 trillion, or around 12% of BTC’s total value.

“Crucially, we believe that Bitcoin’s scalability issues which have been the primary barrier to its widespread adoption, will be resolved by emerging Bitcoin Layer-2 (L2) solutions,” according to the report.

VanEck says it is too early to declare winners but identifies 16 “high potential” Bitcoin L2s. Source: VanEck

According to the report, the ascent of BTC will be partly driven by a decline in the world’s leading economies — such as the United States, the European Union and Japan — relative to global economic activity. VanEck also anticipates a loss of confidence in those economies’ currencies resulting from unconstrained deficit spending.

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“In this environment of uncertainty, businesses and consumers worldwide are likely to recognize the endemic flaws of alternative fiat currencies, thereby generating demand for a neutral medium of exchange with immutable property rights and predictable monetary policy,” the report said. “This is where Bitcoin comes in.”

VanEck specifically cites the diminishing usage of the euro and Japanese yen in international settlements as an opportunity for expanded use of BTC. The euro’s share of cross-border payments has declined from around 22% in the mid-2000s to only 14.5% today, the report said, adding that the yen declined from around 6.2% to 5.4% in the same period.

The report assumes continued fiscal mismanagement by the world’s leading economies and a simultaneous deterioration of property rights, which may contribute to a rotation out of fiat currencies. VanEck flags problems with mining, scalability and regulation as potential risks to continued BTC adoption.

Although gold has a well-established track record as a global reserve asset, VanEck said limitations related to logistics, security and financial integration are hurdles to returning to the gold standard.

VanEck says it is too early to declare winners among Bitcoin L2s but identifies 16 “high potential” projects, including Lightning Network and Stacks.

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