VanEck has released a detailed outlook on Bitcoin's potential trajectory over the coming decades, estimating that its price could reach approximately $2.9 million by the year 2050 in a base case scenario. This forecast implies a compound annual growth rate (CAGR) of roughly 15% from current levels, which hover near $88,000.
The base case prediction is anchored on the assumption that by 2050, Bitcoin will serve as a settlement mechanism for between 5% and 10% of global international trade, along with capturing 5% of domestic trade transactions. Additionally, VanEck anticipates that central banks will allocate about 2.5% of their balance sheets towards Bitcoin as a reserve asset. This combination reflects a significant structural transformation where Bitcoin evolves from primarily a speculative instrument into a widely accepted institutional monetary asset.
VanEck’s analysis models Bitcoin’s market penetration through two main vectors: its role as a medium of exchange in global trade and its function as a reserve asset held by central banks. Their projections include a range of scenarios. In a bearish outlook, Bitcoin’s value might settle around $130,000 by 2050, corresponding to a modest 2% CAGR, should adoption fall short of expectations. Contrastingly, the bullish case envisions Bitcoin capturing 20% of international trade and 10% of domestic GDP, driving the price to an extraordinary $53.4 million by 2050, representing a 29% CAGR.
The firm's research also uncovers a strong correlation between Bitcoin’s pricing and the global supply of money as measured by M2 money stock. Since 2014, changes in central bank money supply explain over 54% of Bitcoin's price variations, suggesting that Bitcoin tends to react primarily to monetary expansion and currency debasement rather than to the performance of technology stocks as commonly assumed.
In practical terms, as the total supply of dollars in circulation grows, and with Bitcoin’s capped supply fixed at 21 million coins, increased demand from more dollars chasing the limited asset pushes its price upward. Furthermore, VanEck highlights that Bitcoin historically moved in opposition to the U.S. Dollar; when the dollar weakened, Bitcoin prices rallied. However, this inverse relationship has become less pronounced recently, indicating that Bitcoin’s price now responds more broadly to fiscal concerns worldwide rather than simply to dollar fluctuations.
The short-term volatility in Bitcoin's price is predominantly influenced by trading activity in futures markets and leverage utilization. Futures-related trading activity accounts for approximately 73% of Bitcoin's price swings since October 2020. This means that changes in leveraged positions can cause sharp price movements independent of fundamental developments.
VanEck also monitors the Relative Unrealized Profit (RUP) metric, which assesses the extent of profit positions held by investors. Currently, RUP stands near 0.43, substantially below the 0.70 levels historically associated with market peaks. This metric suggests that Bitcoin remains in a mid-cycle phase with potential for further appreciation. Supporting this, futures funding rates are recorded at around 4.9%, compared to the higher 10%+ rates that have typically preceded trend reversals, signaling balanced investor sentiment.
Regarding portfolio strategy, VanEck recommends that investors consider a strategic allocation to Bitcoin ranging from 1% to 3% for diversified portfolios. For those with higher risk tolerance, allocations up to 20% may be appropriate based on historical optimizations of return-to-risk ratios like the Sharpe ratio. Backtesting historical data reveals that a 3% Bitcoin holding within a conventional 60/40 equity-bond portfolio delivered superior risk-adjusted returns, yielding an annualized return of 13.05% and a Sharpe ratio of 1.08. This compares favorably to the standard 60/40 portfolio’s 9.68% annualized return and 0.88 Sharpe ratio.
Long-term volatility expectations for Bitcoin are placed between 40% and 70%, although recent realized volatility has compressed closer to 27%. VanEck anticipates that over full market cycles, Bitcoin's correlations with equities, bonds, and gold will remain low to moderate, preserving its diversification benefits in portfolio construction.
The firm further argues that excluding Bitcoin entirely introduces risks amid growing sovereign debt challenges and currency debasement concerns. Incorporating even a modest, disciplined allocation may serve as a hedge against these macroeconomic risks without requiring investors to commit extensively to cryptocurrencies.