This year has been a big one for digital currencies, with the total market cap for bitcoin and altcoins jumping 20 times in price in 2018 — from $18 billion in January to over $111 billion in June to $360 billion in December.

This huge market cap jump drew the attention of mainstream media to cryptocurrencies. Big price rallies and media spotlights led a lot of analysts and speculators to come forward with their own price predictions for the future of bitcoin. These predictions range from an eventual fall to zero to a rise to $1 million in 10 years. Take a look at headlines about bitcoin in the last year, and you’ll likely notice that words most commonly used included “crash,” “surge” or “rocket.”

So, will bitcoin crash to zero or rocket past $1 million in the next decade?

Predicting the future value of anything can be tricky, but predicting the development of a new world monetary system and cutting-edge technology is even trickier. The person predicting the price of bitcoin risks looking foolish (or brilliant) in just a couple of years — but I’m willing to take my chances.

First, let's look at the psychology of predictions. To predict something correctly, one needs to avoid three common mistakes:

  • The first mistake is failing to use critical thought as part of the process. Most people tend to form an opinion fairly quickly and without extensive knowledge on the topic.
  • The second mistake is not being able to step outside of yourself and your current understanding of a subject. The best example of this is companies like Kodak or Nokia, both of which lost leadership positions in their industries as the result of an apparent refusal to recognize the power of new technologies like digital photos and touchscreen phones.
  • The third mistake is failing to see the future because it is not appealing to you on an individual level. This is true for biggest beneficiaries of our current system, such as big bankers (I’m looking at you, Jamie Dimon).

The global economy had a nominal GDP of $78 trillion in 2016. IMF estimates the GDP will reach $103.2 trillion by 2022. There is no data for 2027, but we can assume it will be a lot higher. At its current pace, it could theoretically reach $125 trillion by then.

But for the purposes of this exercise, let's just say the world's GDP will stagnate from 2022 and remain $103.2 trillion in 2027 as well. My assumption is that 5 percent of the world's GDP will be stored and exchanged on blockchain technology within this time. With 5 percent of $103.2 trillion being $5.16 billion, that would be our market cap for all cryptocurrencies.

Bitcoin’s current dominance in the overall cryptocurrency market cap is 57.8 percent, and it generally continues to hover around that number. Bitcoin supply is controlled so there will be approximately 20,179,687 BTC in circulation in 2027. With that in mind, let's say bitcoin dominance will be at 50 percent. That will leave us with bitcoin market cap of $2.58 trillion. When we divide that number with all bitcoins in circulation at that time, we can estimate that each bitcoin would be worth $127,851.

Now, you can play a bit with the numbers and change initial assumptions to get your own predictions for bitcoin price. For example, say you are a big believer in some alternative currencies and think they will beat bitcoin in the long run. In that theoretical event, adjust the bitcoin dominance and assume it will be just 25 percent of the overall market cap. That would give you a price of $63,925 per bitcoin (providing all other assumptions say the same).

So where does this leave us?

I think it's safe to say that the price of bitcoin is positively correlated with the number of bitcoin users. As the user base grows, so will the price of bitcoin. And that is happening at a rapid pace: Coinbase, the largest exchange in the U.S., is adding 1 million users per month every month since July of this year.

For the really extreme $500,000 or $1 million per bitcoin predictions to happen, bitcoin needs to mature as a technology, solve all of its scaling issues and become adopted as both a digital currency and digital gold. For what it’s worth, Bitcoin has made a 75,300 percent gain since 2011, with average daily gains of 0.52 percent.

Admir Tulic is a crypto enthusiast and educator at Captain Altcoin.