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Will Bitcoin reach $100,000 in 2024?
At the start of 2024, a price target of $100,000 for Bitcoin (CRYPTO: BTC) seemed obvious. Bitcoin had just rebounded over 150% to reach a price of $45,000. Wall Street had finally adopted Bitcoin as an asset class, and the imminent arrival of new spot Bitcoin ETFs promised to unlock a torrent of new investors in Bitcoin.
The problem, however, is that the entire investment thesis of Bitcoin ETFs has not gone as planned. In fact, Bitcoin is down almost 10% since spot Bitcoin ETFs began trading on January 11. But don’t worry: the investment thesis for Bitcoin ETFs continues to evolve, and Bitcoin has another major catalyst coming this year. Together, could they provide the fuel needed to send Bitcoin soaring?
Bitcoin ETF investment thesis: the rest
The frustrating part of the Bitcoin ETF’s original investment thesis is that the price of Bitcoin did not immediately increase in January. Although the new Bitcoin ETFs appear to be an initial success, not all of the new buying by Wall Street investors has caused the price of Bitcoin to rise. Rather, it appears that investors simply moved money from one Bitcoin investment product to another Bitcoin investment product, with little or no real change in their overall Bitcoin exposure.
Image source: Getty Images.
As might be expected, we are already seeing an evolution of this original thesis. At the end of January, Ark Invest published its new report “Big Ideas 2024”. In it, the investment firm included a very bullish update on how much Bitcoin it believed investors should optimally allocate to their portfolios. Instead of its previous guideline of 6.2%, it now suggests a much higher optimal Bitcoin allocation of 19.4%.
This is a radical change, which also leads to radical price targets for Bitcoin. According to Ark Invest, if you use the 19.4% assumption and apply it to the global investable asset base of $250 trillion, then you can arrive at a price target of $2.3 million. dollars for Bitcoin. Essentially, it would be a world in which all investors went wild for Bitcoin. Imagine not only huge Wall Street institutional investors, but also huge sovereign wealth funds, moving a fifth of their assets into Bitcoin.
Obviously, the level that Bitcoin can reach this year largely depends on how much of their portfolios investors are willing to allocate to crypto. If you assume that 1% remains the rule of thumb for most investors, then reaching $100,000 might be more difficult than initially expected. But if you’re willing to change direction and increase that allocation percentage to 5%, 10%, or even 20%, then Bitcoin could become absolutely stratospheric.
The story continues
Bitcoin Halving
But the Bitcoin ETF story may not be the biggest story of the year for Bitcoin. The highly anticipated Bitcoin halving will take place in April and could unlock huge value for the cryptocurrency. There have been three previous Bitcoin halvings (in 2012, 2016, and 2020), and each led to spectacular rallies. The 2020 halving, for example, saw Bitcoin reach its all-time high of nearly $69,000.
So, will we see another all-time high for Bitcoin? Obviously, past performance does not guarantee future performance, so it is risky to assume that Bitcoin will skyrocket again this time around. Additionally, keep in mind that earnings halving can take between 12 and 18 months. This means we may not see the true extent of the Bitcoin halving until 2025.
But, as with the Bitcoin ETF investment thesis, the Bitcoin halving thesis seems to make a lot of sense. By halving, the mining reward paid to Bitcoin miners for adding a new block to the Bitcoin blockchain halves. This has two important consequences. First, it reinforces the relative scarcity of Bitcoin. Second, it makes Bitcoin more deflationary over time. These two results should make Bitcoin more attractive to investors in the long term.
What could go wrong?
My main concern is that as Bitcoin becomes more mainstream, it will start to behave differently than it has in the past. For example, let’s take the famous (some might say infamous) volatility of Bitcoin. With so many institutional investors deciding to purchase Bitcoin for their portfolios, and many of them adopting a buy-and-hold strategy, it is not out of the question that Bitcoin will become less volatile over time.
This reduction in volatility is fantastic if you want a nice, safe investment that you don’t need to check every 24 hours. But it’s lousy if you want the kinds of rocket moves needed to hit a price like $100,000 or more.
As a result, I am starting to recalibrate my expectations regarding Bitcoin. I expect this to become less volatile over time. And, as it becomes more mainstream, I expect it to become more correlated to traditional asset classes. Together, this could lead to less aggressive price swings for Bitcoin than we have seen in the past. That being said, however, I am still long-term bullish on Bitcoin, which I believe still has a chance of breaking the $100,000 mark by the end of this year.
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Dominique Basulto has positions in Bitcoin. The Motley Fool posts and recommends Bitcoin. The Mad Motley has a disclosure policy.
Will Bitcoin reach $100,000 in 2024? was originally published by The Motley Fool