During the first six months of 2024, you’ve probably heard all kinds of ultra-bullish predictions about where the price of Bitcoin (CRYPTO: BTC) could be next. For example, international bank Standard Chartered now thinks Bitcoin could rise to $150,000 by the end of 2024.
That price target is aggressive, but perhaps not aggressive enough. Billionaire venture capitalist Chamath Palihapitiya thinks Bitcoin could reach $500,000 by October 2025. According to Palihapitiya, two key catalysts can make this possible.
The Bitcoin Halving
The main catalyst for a rapid price increase is the halving. Bitcoin recently underwent its fourth halving on April 19 and the current expectation is that this event will generate tremendous value in the coming year.
With each halving, the reward paid to Bitcoin miners is halved. That may not sound like a big deal (unless you’re a Bitcoin miner), but it has profound implications for Bitcoin’s price. First, the halving increases Bitcoin’s scarcity. Secondly, it also strengthens Bitcoin’s anti-inflationary nature, making it even more desirable as a hedge against inflation.
It is the combination of these two factors that have led to truly stratospheric returns for Bitcoin in previous halving cycles. For example, in May 2020, Bitcoin rose from a price of around $8,800 to a (then) record high of $69,000 in November 2021.
To model Bitcoin’s future price performance, Palihapitiya analyzed Bitcoin’s price performance over different time intervals of the 2020 halving cycle. During the first three months, Bitcoin’s price “only” increased by a multiple of 1.37x as investors tried to find out what happened to Bitcoin. But as the effects of the halving became apparent, Bitcoin’s price rose by a multiple of 6.51x in twelve months, and 7.8x in 18 months.
Using these numbers, Palihapitiya says it is possible to construct a potential timeline of how Bitcoin’s price could rise during the 2024 halving cycle. We can likely expect Bitcoin’s price to remain unchanged for much of the summer will largely act sideways. That marks the first three months of the cycle. But the price of Bitcoin could start to rise as we enter the fall and winter. By April next year, Bitcoin’s price could be well on its way to $500,000.
Of course, past performance does not guarantee future performance. Just because Bitcoin behaved a certain way four years ago is no guarantee that it will behave the same way today. To some extent, Palihapitiya recognizes this. Given even larger price increases during the 2012 and 2016 halving cycles, Palihapitiya focused only on the 2020 halving cycle, to keep price estimates as conservative as possible.
Bitcoin as a reserve asset
The second key factor is Bitcoin’s growing opportunity to become a global reserve. According to Palihapitiya, it is increasingly likely that non-Western countries will become a ‘dual currency’. This means they will choose to hold both their domestic currency and Bitcoin.
You’re probably thinking: why would a country want to own Bitcoin when it can hold US dollars? Consider the fate of the dollar. The US is adding $1 trillion in new debt every 100 days, and its budget deficits are becoming worrisome. The more debt the US takes on, the more money has to be printed, and the less valuable the dollar becomes. Palihapitiya calls this the process of ‘dollar decline’.
Given this context, it is possible to understand why some non-Western countries may no longer want to hold dollars. Case in point: Saudi Arabia is reconsidering its petrodollar deal with the United States. This arrangement, which lasted fifty years, is perhaps one of the most important foundations of the modern world economy. It forces everyone in the world to buy dollars to buy oil, and it creates a constant demand for US debt.
If countries around the world start holding fewer dollars, this could open the door for Bitcoin. Add to this the fact that many institutional investors now view Bitcoin as a form of ‘digital gold’, and it is easy to see the path in which Bitcoin could become a reserve asset. At some point, Palihapitiya thinks Bitcoin can completely replace gold.
How likely is this scenario?
While it’s possible to poke holes in the ‘Bitcoin halving will lead to massive price gains’ statement, even skeptics have to admit that there’s something fundamentally new this time with the 2024 halving. This is the first time ever we have Bitcoin ETFs seen, and that could make the difference. Any selling pressure in the crypto market could be offset by new investor flows into the ETFs.
As a result, I am still bullish on Bitcoin despite its recent lackluster performance since the April halving. If all goes according to plan, crypto investors could have a lot to celebrate in 2025.
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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.
Bitcoin Could Reach $500,000 by October 2025, According to This Billionaire Investor, originally published by The Motley Fool
