Thirteen years into Bitcoin’s existence, it’s easy to believe that most of its growth is behind it.  Part of this is the result of the bias we all share that causes us to imagine the current state of things as their terminal stage of devel­op­ment.  However, when we apply critical thinking to assess where Bitcoin is in its growth trajec­tory, we find the opposite is true: it is still very, very early. 

There are two ways to think about how early it is for Bitcoin as a store of value asset: 

1. Valua­tion as a percent of its full potential
2. Adoption as a percent of its full poten­tial ( the focus of this article). 

Valuation

The first and most common way to assess how early it is for Bitcoin is to look at its total value (currently ~$500B) and compare that to its full poten­tial.  The challenge with this is obviously that Bitcoin’s full poten­tial is a matter of specu­la­tion.  Those who deeply under­stand Bitcoin tend to view its poten­tial as at least that of gold (~$13T) but theoret­i­cally more like $200T (about half the world’s total value). 

For a quick overview of this $200T poten­tial, let’s take a look at Bitcoin’s total address­able market.  For simplicity, we will just look at the store of value role, and ignore its poten­tial to eat market share from the ~$100T in total value sitting in the world’s various curren­cies.  By taking stock of the various store of value assets and roughly estimating what % Bitcoin could capture from them, we get a result like this:

While the path to $200T is not a huge stretch, at face value it feels too good to be true.  Since it’s unprece­dented for a store of value commodity to attain a value greater than gold, it’s simply uncharted terri­tory.  But even if we simply stick with the lower target value by matching gold’s $13T, Bitcoin still has a lot of price growth ahead. 

Most of Bitcoin’s upside remains

Anyone who is consid­ering storing some of their hard earned money in Bitcoin asks themselves “am I early or late?”  Invari­ably, everyone feels late when they arrive.  There are endless examples of people lamenting how late they were in 2011 or 2013 or 2016, when Bitcoin’s price was $5, $100, and $600, respectively. 

Like with any growing commu­nity where scarce real estate is involved, newcomers are envious of the claims that people have already secured, without realizing that the people who have yet to come will be envious of them.  This phenom­enon holds true when every frontier develops.  For example, latecomers to the California gold rush would have been disap­pointed to find the rich gold fields already spoken for, and might have settled instead for a few hundred acres of ranch land now worth a fortune. 

At the heart of this senti­ment is the fear that there is no more upside left, no more money to be made by staking claim to what’s still avail­able.  Have we reached that point with Bitcoin?

Well, no.  It seems to be the opposite, actually.  Based on the full poten­tial valua­tion range we estab­lished above, even in the low-end outcome ($13T), the vast majority of wealth that will be gained by Bitcoin holders has yet to be made (96%).  To match gold’s valua­tion, Bitcoin still has to grow 26x.

And if the high-end outcome ends up being the case, a full 99.7% of Bitcoin’s total wealth gener­a­tion remains ahead.  This would mean Bitcoin still has 400x to grow, dwarfing the gold milestone.

By putting Bitcoin’s current valua­tion into perspec­tive, it becomes clear that it’s still very early for Bitcoin. 

While this analysis suggests there may be anywhere from 26x to 400x upside remaining for Bitcoin, it’s helpful to cross-check this conclu­sion through a different line of reasoning where the full poten­tial is known… 

The number of Bitcoin adopters

Estimates of the number of Bitcoin holders world­wide vary widely.  This has led to a fair amount of ambiguity and uncer­tainty about what the actual numbers are, and a certain degree of resig­na­tion that this number is simply too hard to accurately assess.  While it is hard to nail down a defin­i­tive number, the main reason for the variance in estimates is a lack of standard­ized defin­i­tions of what Bitcoin adoption means.

The truth is that there are different levels of Bitcoin adoption.  By segmenting Bitcoin adoption it becomes easier to see not only why the wide range in estimates exists, but more impor­tantly, how early adoption of Bitcoin as a preferred store of value still is. 

For these purposes, let’s segment Bitcoin adoption into four different “levels”:

1. Casual dabblers  (toe dippers)
2. 1% alloca­tors  (ankle deep)
3. Signif­i­cant believers  (waist high)
4. Bitcoin maximal­ists  (gone snorkeling)

Before we begin, we need a denom­i­nator.  We could use global popula­tion, but imo this skews results.  What we’re really assessing is what percentage of the world with some wealth to store in Bitcoin has done so.  According to Statista, 2.2B people in the world have at least $10k in net worth, which seems like a reason­able threshold for having meaningful wealth to store.  In truth, impov­er­ished commu­ni­ties will also use Bitcoin as a store of value, and will arguably derive greater utility from it as a result of marginal access to tradi­tional banking infra­struc­ture as “low value” bank customers.  However, for our purposes, we are simply looking at how many people have adopted Bitcoin among the group with meaningful wealth to store, so 2.2B will serve as our full poten­tial market size.

1. Casual dabblers

This segment of adopters includes everyone who has any amount of Bitcoin — your friend with $20 of BTC on a wallet somewhere, or your aunt who can’t remember her Coinbase password from 2017.  In my opinion, much of the confu­sion around how many people have adopted Bitcoin comes from conflating “casual dabbler” adoption as full fledged Bitcoin adoption.  The reality is that these tinkerers are mostly just exper­i­menting, whether to get a sense for what everyone is talking about, or to throw a few dollars into Bitcoin in the hopes that maybe you hit the jackpot, like you might do with lottery tickets. 

For this reason, the “casual dabblers” are the red herring of Bitcoin adoption.  Their behavior does not actually consti­tute adoption, and there­fore should not be counted as meaningful Bitcoin adopters.  In truth, when dabblers realize that Bitcoin is the best store of value asset in history, they won’t stick with their $20 of Bitcoin.  Instead, they will transi­tion their savings in more meaningful amounts.

In terms of sizing this contin­gent, Willy Woo put together a reason­ably exhaus­tive and inclu­sive estimate of ~187M total Bitcoin adopters, meaning that they are “casual dabblers” at minimum. 

Using this and our full poten­tial of 2.2B people as a denom­i­nator, 8.5% of poten­tial Bitcoin adopters have reached the “casual dabbler” level of Bitcoin adoption.  This is a fairly high number and entirely misleading of the true extent of meaningful adoption, as subse­quent segments will show.

2. 1% alloca­tors

For the remaining subcat­e­gories, accurate data is less avail­able.  As such, all we can do is come up with reason­able estimates via triangulation.

In my mind, the “1% alloca­tors” can be charac­ter­ized as Bitcoin adopters who want to have a small but not trivial alloca­tion to Bitcoin.  For our purposes, I think a decent threshold for this group is anyone who has at least 0.1 Bitcoin can be consid­ered to have at least a small but not trivial Bitcoin position. 

Looking at the Bitcoin blockchain, there are ~3M addresses that have at least 0.1 BTC.  On top of these on-chain numbers, we have to account for the consid­er­able number of people who have this amount in an exchange or GBTC.  Combined, I think it’s reason­able to estimate that 10M people have reached the “1% alloca­tors” level of adoption or higher. 

Based on these numbers, only ¹⁄₁₇ “casual dabblers” have reached the “1% allocator” level of adoption, meaning that this level of Bitcoin adoption has only achieved 0.5% penetra­tion to date.  This steep drop off is why it’s a red herring to label the large number of “casual dabblers” as full Bitcoin adopters.

3. Signif­i­cant believers 

This category includes anyone who has reached a level of under­standing of Bitcoin that a 1% or even 5% alloca­tion no longer seems suffi­cient.  Broadly speaking, this group is in the 5 – 50% alloca­tion range.  I would go so far as to say that most of the people who count themselves as believers in Bitcoin, including most of Bitcoin Twitter, are somewhere in this group. 

Assessing the size of this group gets much fuzzier, but we can rely on on-chain data to work our way to a reason­able estimate.  To start, let’s assert that most people who have reached this level of belief in and under­standing of Bitcoin have clawed their way to holding at least 1 Bitcoin.  Addition­ally, this level of adopter has probably secured their Bitcoin in an on-chain wallet that they control.  Looking at on-chain data, ~820k addresses have at least 1 Bitcoin.  As a rough assump­tion, let’s say that 500k of these are owned by people who have reached the “signif­i­cant believer” level of adoption at minimum.  If we then gener­ously round up to account for people who haven’t achieved whole­coiner status or who are holding their funds on an exchange, we get to a rough estimate of 2M “signif­i­cant believers”. 

4. Bitcoin maximal­ists

For our purposes, let’s say this group includes anyone who has dug deep enough into Bitcoin to conclude that more than 50% of their net worth should be stored in Bitcoin.

Gauging the size of this group is nearly impos­sible, so we’ll get creative.

1. “The Bitcoin Standard” sales
   1. Let’s conser­v­a­tively estimate that only 20% of maximal­ists have purchased The Bitcoin Standard, and 50% of people who read it became maximal­ists.  Based on the book’s Amazon US rank (6,681), online calcu­la­tors estimate ~15k copies have been sold.
      
      Let’s gener­ously round that ~15k number up to 50k to account for inter­na­tional sales and non-Amazon purchases. 

This nets an estimate of 125k maximal­ists.  To err on the side of caution, let’s double that and call it 250k.

2. Quali­ta­tive triangulation
   1. Purely subjec­tive, but it seems to me that there are maybe 10k actively engaged Bitcoin maximal­ists on Twitter, the primary home of maximalist commu­ni­ca­tion.  To be very conser­v­a­tive, let’s say this repre­sents ~5% of maximal­ists (200k total).
   2. Addition­ally, as a top-down assess­ment, it seems reason­able that ~10% of people who have reached 5 – 50% Bitcoin alloca­tion have made the leap to maximalism.

All in all, ~250k Bitcoin maximal­ists seems a conser­v­a­tive, if not generous assumption. 

That puts us at 0.01% penetration.

Conclusion

Either way you look at the numbers, it’s very early still for Bitcoin.  By looking at Bitcoin’s valua­tion as a percentage of its full poten­tial, we see that Bitcoin’s current value is somewhere between 0.2% and 3% of its eventual end state, meaning 30x to 500x upside remains.  By looking at Bitcoin’s adoption progress, we see that Bitcoin’s current adoption penetra­tion is somewhere between 0.01% and 8.5%, depending on what threshold of adoption you look at. 

If you believe, as I do, that Bitcoin is on a path to become the dominant store of value and preferred money for the world, eventu­ally the norm will be to have more than 50% of their net worth in Bitcoin.  Since our analysis here suggests that only 0.01% of the world already meets this threshold, it stands to reason that 99.99% of the world remains to follow.

Overall, while everyone who shows up to Bitcoin inevitably feels the pangs of regret for not investing sooner and wonders if they missed the boat entirely, it’s clear that most of Bitcoin’s growth remains ahead.  To put this in some context, since there will only ever be 21M Bitcoin, the average person on earth (out of 8B people) will have just 0.0025 Bitcoin.  It is still so early that this average person’s total net worth in Bitcoin can be purchased for just $60.  You are still very early, congrat­u­la­tions and enjoy stacking those sats while they’re still this cheap!