Although only a handful of publicly traded companies have been successful, unlike gold, silver and bitcoin, equities have the potential to generate income which in turn can be used for buybacks, dividend payments or the development of additional income streams.
On the other hand, if bitcoin is introduced, those same companies will likely be forced to convert some of their money into non-inflationary assets, increasing the demand for gold, silver and bitcoin.
In fact, the data shows that diversification between bitcoin and traditional assets offers better risk-adjusted performance for investors, something that is increasingly difficult for companies to ignore.
Bitcoin continues to cross the $1 trillion mark, but it’s also easy to overlook until you compare it to the market capitalization of other major global assets. To date, this achievement has been accomplished with less than ten operational resources.
The 20 most profitable companies in the world. Source : fortune.com
As noted above, the world’s 44 most profitable companies collectively generate more than $1 trillion in profits each year. Keep in mind that shareholders can reinvest their dividends in shares, but some of it may end up in bitcoins.
$1 trillion is small compared to real estate markets
Corporate profits are not the only stream that can seep into scarce digital assets. Some analysts think some real estate investments, especially those with returns below inflation, will eventually shift to riskier assets, including bitcoin.
On the other hand, current owners of profitable properties may be interested in diversifying. Given the relative scarcity of available assets, equities, commodities and bitcoin are likely to benefit from some of this inflow.
Global real estate markets. Source : visualcapitalist.com
According to the chart above, the value of agricultural real estate is estimated at $27 trillion worldwide. The U.S. Department of Agriculture estimates that the return on equity in agriculture will be 4.2 percent by 2020. Although the data is very raw, given the many uses of agricultural real estate, it is realistic to think that the sector generates more than $1 trillion per year.
As Cointelegraph recently reported, 51.9 million people have a net worth of $1 million or more, not counting debt. Although they represent only 1% of the adult population, they amount to $173.3 trillion. Even if those who don’t want to sell their assets in exchange for BTC get a paltry 0.6% annual return, that’s enough to create $1 trillion.
If there is a bubble, bitcoin is not the only.
These figures confirm that the $1 trillion market capitalization for bitcoin should not immediately be considered a bubble.
Perhaps these bitcoin maximalists are right and the world’s wealth is greatly inflated by the lack of rare and safe options to store wealth. In this case, which does not seem obvious, global asset deflation would certainly limit the upside potential of BTC. Unless they think cryptocurrencies can extrapolate global wealth, which seems odd.
Returning to a more realistic view of the world, the above comparison to stocks, farm real estate, and global wealth also confirms how insignificant the current $244 billion capitalization of Ether (ETH) is, let alone the remaining $610 billion in Alcoins.
Assuming none of the company’s profits or property income goes to cryptocurrencies, this seems unlikely. On the other hand, the annual flow of Bitcoin, at only $100 billion, is five times greater than the flow of newly minted coins, which is $20.3 billion per year at the current price of $59,500.
For example, a $100 billion investment in bitcoin would represent only 5% of the $1 trillion in annual corporate dividends and 5% of global wealth or real estate returns. While the impact on gold’s $11 trillion market capitalization would be negligible, such allocations would certainly play an important role in bitcoin’s journey to become a multi-billion dollar asset.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph. Every investment and every stage of trading involves risk. You should do your own research before making a decision.
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