Over the first six months of 2024, you’ve probably heard all kinds of ultra-optimistic predictions about where the price of Bitcoin (CRYPTO:BTC) could be next. International bank Standard Chartered, for example, now believes that Bitcoin could rise to $150,000 by the end of 2024.

This price target is aggressive, but it may not be aggressive enough. Billionaire venture capitalist Chamath Palihapitiya thinks Bitcoin it could reach $500,000 by October 2025. According to Palihapitiya, two main catalysts could make this happen.

Bitcoin Halving

The main catalyst for rapid price appreciation is the reduce by half. Bitcoin recently had its fourth halving on April 19, and the current expectation is that this event will unlock tremendous value over the next year.

Image source: Getty Images.

With each halving, the reward paid to Bitcoin miners is halved. This may not seem like a big deal (unless you are a Bitcoin miner), but it has profound implications for the price of Bitcoin. First, the halving increases Bitcoin’s scarcity. Secondly, it also increases the anti-inflationary nature of Bitcoin, making it even more sought after as a hedge against inflation.

It is the combination of these two factors that has led to truly stratospheric returns for Bitcoin in previous halving cycles. In May 2020, for example, Bitcoin soared from a price of around $8,800 to a (then) all-time high of $69,000 in November 2021.

To model Bitcoin’s future price performance, Palihapitiya analyzed Bitcoin price performance at different time frames of the 2020 halving cycle. During the first three months, Bitcoin’s price increased by “only” a multiple of 1 .37x, as investors tried to figure out what was going on with Bitcoin. But as the effects of the halving began to manifest, the price of Bitcoin skyrocketed a multiple of 6.51x in 12 months and 7.8x in 18 months.

Using these numbers, Palihapitiya says it is possible to construct a potential timeline for how Bitcoin’s price could increase during the 2024 halving cycle. We can likely expect Bitcoin’s price to trade sideways for much of the summer. This marks the first three months of the cycle. But Bitcoin’s price could start to heat up as we head into fall and winter. Next April, the price of Bitcoin could be on its way to $500,000.

Of course, past performance is no guarantee of future performance. Just because Bitcoin behaved a certain way four years ago is no guarantee it will behave the same way today. To some extent, Palihapitiya recognizes this. Given the even larger price gains in the 2012 and 2016 halving cycles, Palihapitiya focused only on the 2020 halving cycle to keep price estimates as conservative as possible.

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Bitcoin as a reserve asset

The second key factor is Bitcoin’s growing opportunity to become a global reserve asset. According to Palihapitiya, non-Western nations are increasingly likely to become “dual currency.” This means they will choose to hold their national currencies and Bitcoin.

You’re probably thinking: why would a nation want to hold Bitcoin when it can hold US dollars? Well, let’s consider the situation of the dollar. The US is adding $1 trillion in new debt every 100 days and its budget deficits are becoming worrying. The more debt the US takes on, the more money it needs to print and the less valuable the dollar becomes. Palihapitiya refers to this as the “dollar debasement” process.

Given this context, it is possible to understand why some non-Western nations may no longer want to hold dollars. Case in point: Saudi Arabia is rethinking its petrodollar deal with the United States. This agreement, which has lasted 50 years, is arguably one of the most important pillars of the modern global economy. It forces everyone in the world to buy dollars to buy oil and ensures a constant demand for US debt.

If nations around the world start holding fewer dollars, it could open the door for Bitcoin. Add in the fact that many institutional investors now view Bitcoin as a form of “digital gold” and it’s easy to see the path for Bitcoin to become a reserve asset. At some point, Palihapitiya believes Bitcoin could completely replace gold.

What is the probability of this scenario?

While it is possible to poke holes in the “Bitcoin halving leads to huge price gains” thesis, even skeptics have to admit that there is something fundamentally new this time with the 2024 halving. we have Bitcoin ETFs in sight, and that could make all the difference. Any selling pressure in the crypto market could be offset by new investor flows into ETFs.

As a result, I am still bullish on Bitcoin despite its recent indifferent performance since the April halving. If everything goes according to plan, crypto investors could have a lot to celebrate in 2025.

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Bitcoin Could Hit $500,000 by October 2025, According to This Billionaire Investor was originally published by The Motley Fool

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• Top cryptocurrencies such as SOL, AVAX, APT, SUI have seen corrections of 40% to 70% in recent months, weighing on altcoin sentiment, while BTC and ETH are down just 15% from their yearly highs.

• Venture funds are under pressure to sell tokens to make profits on investments made in recent years, Markus Thielen noted.

• The lack of capital flows into crypto markets “has particularly bad implications for tokens with large upcoming unlocks as well as new [tokens] and air launch programs,” said David Shuttleworth, partner at Anagram.

The cryptocurrency market is experiencing healthy consolidation after a huge surge from October to March – at least for those who have invested in the two biggest digital assets.

For those holding smaller cryptocurrencies, though, this is a brutal correction, with the sentiment in crypto social media circles similar to bear market despair.

While Bitcoin {{BTC}} and Ethereum Ether {{ETH}} are just 15% off their yearly highs, several major cryptocurrencies like Solana {{SOL}} and Avalanche {{AVAX}} are down 40% to 50%. % of their March Peaks, while tier 1 challengers sui {{SUI}} and fit {{APT}} had craters of 60% to 70%.

Good advice for purely long-term investors, but I trade and risk books

I believe the cycle is over for 99% of alts,

Keep what makes sense to keep for multi-year/decade investments

-Andrew Kang (@Rewkang) June 21, 2024

Selling pressure from venture funds as the unlocking of supply tokens widens, a lack of new inflows into cryptocurrencies, and seasonal trends have contributed to weakness in altcoins, a term used to describe cryptocurrencies beyond the largest such as bitcoin and ether .

High dilution

Many altcoins experience a dwindling supply of tokens through unlocks and distributions scheduled over the next few years. This is because most tokens are locked, purchased by early investors or earmarked for ecosystem development and subsidies.

For example, the Ethereum layer 2 network’s Arbitrum token {{ARB}} is approaching its all-time low price since last September, even though its market capitalization has risen from $1 billion to $2.5 billion due to a massive increase in its supply.

Another example is Solana, whose supply is inflating by 75,000 tokens, worth about $10 million at current prices, every day.

“Unlike stocks that have a constant passive supply of ETF inflows and bond buybacks, cryptocurrencies, and in particular altcoins, have the opposite – a constant flow of selling pressure,” Quinn Thomson, founder of the hedge fund Lekker Capital crypto, observed in a post X.

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A significant part of the selling pressure comes from venture capital funds making profits on their first investments in projects launched in recent years.

“Venture capital funds invested $13 billion in the first quarter of 2022 as the market turned into a steep bear market,” said Markus Thielen, founder of 10x Research, in a report earlier this week. “These funds are now under pressure from their investors to return capital as artificial intelligence (AI) becomes a hotter topic.”

When the market appetite for smaller, more speculative cryptoassets is waning and trading volumes are falling – as they have been in recent months – there is not enough demand to absorb this supply shock.

See more information: Crypto Markets Under Pressure with $2B Altcoin Token Unlocks and $11B Bitcoin Distribution

Lack of new entries

Liquidity flows into cryptocurrency markets have also stagnated or even reversed in recent weeks, as demonstrated by the market value of stablecoins, which are primarily used as intermediaries for cryptocurrency trading.

The combined market capitalization of the four largest stablecoins – Tether’s USDT, Circle’s USDC, First Digital’s FDUSD and Maker’s DAI – has been stable since April, following a $30 billion expansion earlier this year, according to data from TradingView.

Combined Market Capitalization of USDT, USDC, FDUSD and DAI (TradingView)

Stablecoin balances on exchanges – which translate into dry powder for traders and investors – have declined by $4 billion to the lowest level since February, Anagram partner David Shuttleworth noted in a statement. X post citing data from Nansen.

“This has particularly bad implications for tokens with major upcoming unlocks, as well as new [tokens] and air launch programs,” Shuttleworth said.

Recently launched tokens from blockchain bridge Wormhole (W), yield-bearing synthetic dollar protocol Ethena (ENA), and layer-2 network Starknet {{STRK}} have plummeted around 60% to 70% in price from their respective highs and will face billions of dollars worth of tokens being distributed in the coming years.

Seasonal trends have also been bearish for smaller tokens, with June generally being a bearish month for altcoins.

TradingView data shows that the aggregate market cap for crypto assets, excluding BTC and ETH, captured by TOTAL.3 metric, has seen a decline in every June for the past six years.

This month is on track to be no exception, with TOTAL.3 down 11% year to date.

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Led by executive chairman Michael Saylor, the company held 214,400 bitcoins at the end of April. This latest acquisition brings the company’s total holdings to 226,331 tokens worth just under $15 billion at the current bitcoin price of around $66,000. The company’s bitcoins were purchased at an average price of $36,798 each, or about $8.33 billion.

This most recent purchase followed the company’s $800 million investment convertible note offering for institutional investors. The offer size was originally $500, then increased to $700 million and finally closed at US$800 million. In March, the company added 9,245 BTC for $623 million after raising money in a similar debt issuance.

Saylor and MicroStrategy began accumulating the oldest and largest cryptocurrency in 2020 and have since tried to lead a movement to adopt BTC as a reserve asset for other corporate bonds. While some companies have added modest amounts of bitcoin to their balance sheet, notable is US-listed Semler Scientific (SMLR), which over the past three weeks has not only added bitcoin as a relatively sizable treasury asset, but – in similar way to MicroStrategy – is trying explore capital markets buy bitcoin in quantities much larger than the current market value would indicate.

MicroStrategy shares have risen about tenfold since the company’s bitcoin purchases began four years ago. Semler shares have risen more than 60% since the company disclosed its first bitcoin purchases in late May.

Last week, brokerage Bernstein started covering Microstrategy setting a price target of $2,890 for the company’s shares with an outperform rating. MSTR is currently up 2% in pre-market trading at $1,507.

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(Bloomberg) — MicroStrategy Inc. purchased approximately $786 million in Bitcoin with proceeds raised from the sale of convertible notes.

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The company acquired 11,931 Bitcoins between April 27 and June 19, according to a filing Thursday with the U.S. Securities and Exchange Commission. The purchases increased his overall holdings to 226,331 Bitcoin, valued at around $14.9 billion.

Michael Saylor, president and co-founder of MicroStrategy, began buying Bitcoin in 2020 as a hedge against inflation and an alternative to holding cash. The cryptocurrency is up about 600% since Saylor started buying it.

The decision to buy Bitcoin boosted MicroStrategy’s share price, which has soared more than 1,000% since Saylor’s decision.

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