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Bitcoin to Reach $100,000 by 2025
When it comes to Bitcoin (CRYPTO: BTC) (and cryptocurrencies in general), few things are certain. However, with a better understanding of the inner workings of Bitcoin, there are some certainties that come into focus.
Considering all of this, it seems clear that just as it was inevitable for Bitcoin to hit $1,000, $10,000, and $50,000, the same is true for a price of $100,000.
Image source: Getty Images.
The halving effect
One of the fundamental characteristics of Bitcoin that most influences its price is the halving. A halving event occurs approximately every four years, cutting in half the reward that miners receive for adding new blocks to the blockchain. As a control for the only way new bitcoins enter circulation, reducing the miner’s reward, the halving essentially slashes Bitcoin’s inflation rate.
By reducing the inflation rate, the halving alters the dynamics around Bitcoin supply and demandWith the halving, even if demand remains constant, its price must increase to compensate for the reduction in supply.
Bitcoin has undergone four halvings so far, the most recent of which occurred in April of this year, reducing the block reward from 6.25 to 3,125 BTC and pushing its inflation rate to less than 1%. While it may not seem like a big deal, the halving process is the most significant factor that has affected the price of Bitcoin over the years.
Historically, Bitcoin tends to see significant price increases in the year following a halving. On average, Bitcoin has jumped about 125% higher in halving years. If we measure Bitcoin’s price at the beginning of the year, which was around $45,000, a 125% increase would bring its price to $99,000. This historical pattern suggests that Bitcoin could get very close to the six-figure mark by the end of the year.
The Extra Push Bitcoin Needs
If things play out similarly to past halving years, Bitcoin could find itself close to six figures, but not quite. To add a little more certainty that it has what it takes to hit $100,000 sooner than expected, there’s another factor to consider: spot Bitcoin ETFs.
As of January 2024, 11 Bitcoin spot ETFs were approved, marking a significant milestone for the cryptocurrency and the cryptocurrency market as a whole. These ETFs are designed to track the actual price of Bitcoin and offer investors an easy way to gain exposure to Bitcoin through traditional brokers without having to navigate complicated cryptocurrency exchanges. In essence, Bitcoin spot ETFs democratize access to Bitcoin and open the cryptocurrency to new buyers.
While ETFs will allow retail investors easier access to Bitcoin, the main impact of these ETFs is seen in the institutional investor realm. Spot Bitcoin ETFs help open the door for institutional investors to purchase Bitcoin by providing a regulated and familiar investment vehicle. We are starting to see interest grow, as more than half of the top 20 largest hedge funds now have exposure to Bitcoin, and this number will likely continue to rise.
The story continues
We are still in the early stages of the Bitcoin spot ETF effect, but its significance is already clear. At one point, these 11 ETFs were buying more than 10 times the daily production rate of Bitcoin, and that was before the halving. On the back of this wave of buying, the price of Bitcoin has skyrocketed from $45,000 to its current high of over $73,000.
The buying rate has fallen over the past two months. But if it were to return to these levels, ETFs would be buying at more than 20 times the daily production rate now that the halving is over.
The Reality Investors Need to Know
With the added effect of spot Bitcoin ETFs, plus the effects of the halving still unfolding, 2024 is shaping up to be the year Bitcoin hits the coveted six-figure mark. However, it is crucial to remember that investing in Bitcoin should be done with a long-term goal in mind.
To be honest, whatever happens in 2024 shouldn’t matter all that much. It would be nice if Bitcoin continued to rise, but even if it didn’t, the cryptocurrency’s long-term potential would still be intact. Thanks to its limited supply, as well as other intangibles like its leading levels of decentralization, security, and resilience, Bitcoin’s value is positioned to continue to appreciate as the decades pass.
If there’s one thing Bitcoin has proven, it’s that it rewards the long-term investor. As halvings continue to pile up, holders are starting to see their portfolios grow. Whether Bitcoin hits $100,000 in 2024, 2025, or another year, the cryptocurrency remains an attractive buy as it continues its journey of long-term price appreciation.
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Mr. Fulton has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Prediction: Bitcoin to Hit $100,000 by 2025 was originally published by The Motley Fool