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Bitcoin will reach $100,000 in 2025
Bitcoin(CRYPTO:BTC) has more than doubled to around $63,000 over the past 12 months. This rally was primarily driven by the approval of the first spot-priced Bitcoin ETFs in January, the Bitcoin halving in April, and market expectations for lower interest rates.
These catalysts have led some investors to make extremely bullish predictions regarding the future of Bitcoin. Cathie Wood of Ark Invest believes its price could reach $3.8 million by 2030, venture capitalist Chamath Palihapitiya predicts a price of $1 million by 2040-2042, and Fidelity says its price could reach the whopping $1 billion by 2028-2030.
Image source: Getty Images.
It’s impossible to say whether Bitcoin will come close to those estimates, so most investors should focus on its realistic upside potential rather than lofty price targets. I think Bitcoin has a viable path to reaching $100,000 by the end of 2025, which still makes it a good bet for investors who can stomach short-term volatility.
Bitcoin is only expected to replicate its average annual earnings
From January 1, 2014 to January 1, 2024, the price of Bitcoin increased from $771.40 to $43,835.62. This represented a 10-year compound annual growth rate (CAGR) of 50%. A 50% gain this year would raise Bitcoin’s price to $65,800 by January 1, 2025, while another 50% gain would take its price to $98,700 by January 1, 2026. So, if Bitcoin limited to replicate its average annual growth rate of the past decade, its price could approach $100,000 by the end of 2025.
Another factor is Bitcoin’s performance after each halving, which reduces earnings for mining the cryptocurrency every four years. Let’s take a look back at the price of Bitcoin after each of the three halvings that occurred in 2012, 2016, and 2020.
|
2012 |
$13 |
$1,152 |
|
2016 |
$664 |
$17,760 |
|
2020 |
$9,734 |
$67,549 |
Data source: Bitpay.
Bitcoin’s post-halving returns are decreasing, but this trajectory suggests that its price could still rise significantly after its latest halving, which occurred on April 19, 2024. Bitcoin’s price closed at $63,844 that day. As of this writing it is still hovering around that level, but historical data suggests it could easily surpass $100,000 by 2025.
Institutional purchases could reverse the trend
Bitcoin bulls believe that institutional buying will push its price higher historic highs. According to a recent EY-Parthenon survey, 76% of institutional investors still allocate less than 5% of their portfolios to Bitcoin and other digital assets.
The story continues
Cathie Wood has repeatedly said that if institutional investors added “just over 5% of their portfolios to Bitcoin,” its price would soar into the millions. Wood believes recent Bitcoin endorsements Spot priced ETFs – which make it easier for institutional investors to buy cryptocurrency – will fuel this trend.
The Federal Reserve won’t cut interest rates anytime soon, but it has also said it won’t raise them in the foreseeable future. This stability could push more institutional investors to load up on Bitcoin and more speculative investments this year.
Meanwhile, more businesses could accept Bitcoin for payments, while more inflation-ravaged countries could follow El Salvador’s lead and adopt it as their national currency. This trend would strengthen its reputation as a safe haven and make it more comparable to gold, silver and other precious metals. The US Securities and Exchange Commission supports this view: it is repeatedly stated that Bitcoin is the only cryptocurrency that is a commodity rather than a security.
But investors should prepare for some volatile swings
I believe Bitcoin’s price has a clear path to reaching $100,000 by the end of 2025, but will likely endure some volatile swings before reaching that goal. Therefore, investors should evaluate short-term risks instead of blindly following the bulls.
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Leo Sun has no position in any of the securities mentioned. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.
Prediction: Bitcoin will reach $100,000 in 2025 was originally published by The Motley Fool