Bernstein analysts forecast that the total market value of crypto assets is expected to reach a staggering $7.5 trillion by end-2025. Thanks to what or in spite of what could this happen? Will a price bubble form? And how realistic is this estimate?
Bernstein's forecast is indeed quite ambitious. Total crypto market cap currently stands at about $2.7 trln.
Such growth is possible, but it would require a confluence of favorable conditions and factors:
1. For such large-scale growth, further adoption of cryptocurrencies by large financial institutions, companies and even governments would be necessary. This goal could be reached by improving the regulatory framework.
2. Improvements are required in the areas of blockchain scalability, transaction speed, and ease of cryptocurrency use to draw in a broader scope of users.
3. Cryptocurrencies need to find more practical applications beyond speculative trading to justify such high market capitalization, including steady demand.
4. Inflows from traditional markets (currency, stock, futures)
On the other hand, such rapid growth does pose a threat as regards the formation of a speculative bubble, in which prices outpace fundamentals. After such a bubble bursts, the correction can be painful.
The 3-fold growth in line with Bernstein’s forecast looks quite optimistic, but it will be realistic only if certain conditions are met and cryptocurrencies are used in the real sector of the economy. However, the risk of a price bubble forming is also something that should be kept in mind.