Since reaching a new all-time high in March, Bitcoin (CRYPTO: BTC) has largely disappointed crypto investors. Bitcoin’s price is still trading around $68,000, which is about the same as three months ago.
Furthermore, the two big Bitcoin catalysts of 2024 – the launch of the new spot exchange-traded funds (ETFs) and the halving of mining fees – are now over. So is it time to reconsider where Bitcoin could go in the coming years? Let’s take a closer look at that.
Main thing
The base case assumes that spot Bitcoin ETFs will continue to see an influx of new investor money, and that Wall Street will continue to embrace Bitcoin as a new asset class for portfolio diversification purposes. Over time, this constant influx of new money should send Bitcoin higher.
But how much higher? There are tradeoffs associated with Bitcoin becoming mainstream, and one of them is that Bitcoin could increasingly behave like a traditional asset. That means it may no longer deliver the astronomical returns it once did.
In the decade between 2011 and 2021, Bitcoin delivered annualized returns of 230% per year, compared to 20% per year for technology stocks. So a more reasonable estimate for Bitcoin’s future annual return might be closer to 20%, not 230%.
Using this 20% growth estimate, Bitcoin’s price could more than double from its current $70,000 level to nearly $150,000 in four years. That’s impressive, but nowhere near the $1 million price some Wall Street analysts are now predicting.
Taurus case
The bull case scenario assumes that the steady flow of money into the new Bitcoin ETFs will turn into a tsunami. It also assumes that institutional investors will make Bitcoin one of their largest holdings. Currently, institutional investors are only allowed to allocate 1% or less of their holdings to Bitcoin. But what if they increase that figure to 5%, 10% or even 20%? That’s when Bitcoin’s price could really rise.
At the same time, the bull case scenario assumes that Bitcoin’s long-awaited halving will deliver as originally expected. In three previous halving cycles (in 2012, 2016, and 2020), Bitcoin’s price absolutely exploded. So why can’t it happen this time?
For example, in the previous halving cycle, Bitcoin’s price shot up from $10,000 in May 2020 to $60,000 in April 2021. So any bullish forecast must take into account an extended period of very rapid growth in Bitcoin’s price.
Finally, the bull case scenario assumes that lawmakers in Congress will pass pro-Bitcoin legislation after the 2024 elections. We’re already hearing rumors of a massive change in the way Washington DC views crypto, and if the next president is bullish on Bitcoin, things could get very interesting.
Bear case
The bear case scenario is essentially the “I told you so” scenario. That’s what happens when all the warnings from leading investors turn out to be correct. For years, some of the top names on Wall Street have claimed that Bitcoin is basically just a giant Ponzi scheme. And Warren Buffett said he wouldn’t pay $25 for all the Bitcoin in the world.
This isn’t to say that Bitcoin will drop to zero in the next four years, just that it might not deliver the kind of life-changing wealth some people expect. For example, what happens if the halving turns out to be a flop? Or if people stop investing their money in the new Bitcoin ETFs? Or if any crypto legislation stalls in Congress due to political infighting? In such a scenario, Bitcoin could never become mainstream. And if Bitcoin doesn’t go mainstream, there’s no way it can reach $1 million.
Consider a range of possible outcomes
When thinking about Bitcoin, it’s important to consider a range of different outcomes. It doesn’t matter whether you call them “bull case” or “bear case” scenarios, just that you recognize that a few small changes to your core assumptions could have a huge effect on where you think the price of Bitcoin goes next .
Take Cathie Wood of Ark Invest, for example. While she has predicted that Bitcoin’s price could reach $1.48 million by 2030, she also provides a bear case scenario, in which Bitcoin could potentially reach just $258,500. These large swings in outcomes are based on adjusting just a few key parameters, such as the expected portfolio allocation to Bitcoin by institutional investors.
Personally, I am still bullish on Bitcoin in the long term. But I’m starting to dial back some of my expectations for Bitcoin over the next four years. Once you start playing with the numbers, you’ll realize how much has to go right for Bitcoin to reach the mythical $1 million mark.
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Dominic Basulto has positions in Bitcoin. The Motley Fool holds and recommends positions in Bitcoin. The Motley Fool has a disclosure policy.
3 Bold Predictions for Where Bitcoin Could Be in Four Years (The Last One Might Shock You) was originally published by The Motley Fool
