The Bitcoin (BTC 0.09%) cryptocurrency reached an all-time high of roughly $68,800 in November of 2021. Since then, a marketwide retreat from high-risk investment ideas drove the digital currency back to approximately $20,300 per coin -- a 70% price drop in nine months. Investors are worried about inflation, geopolitical tensions, and the continued fallout from the coronavirus pandemic.
Some cryptocurrency bears believe that this could be the beginning of the end for digital currencies. However, Bitcoin investors with diamond hands continue to HODL their crypto coins, expecting another upswing in this volatile market.
There are differences of opinion, and only time will tell exactly how Bitcoin's chart will shape up in the long run. Crypto investors are scratching their heads, wondering whether Bitcoin will ever be worth $100,000 per coin.
I believe that the answer to that question is a resounding "yes." Bitcoin is almost guaranteed to reach the $100,000 price point. But it could take a couple of years to get there, and you should be prepared for some rough weather on that trip.
Why is Bitcoin valuable at all?
Bitcoin's value is based on its limited supply. There will only ever be 21 million Bitcoins, and 19.2 million of those digital coins have already been created. The U.S. money supply doubled between 2013 and 2022. Bitcoin's supply will never grow more than 9.8% from today's level.
This quality makes Bitcoin similar to gold, which cannot be created in a lab and has limited supplies available even if we eventually dig up every last ounce of it. Limited supply plus rising demand equals higher prices over time.
Many investors and developers see Bitcoin as a direct replacement for gold in the long run. If that works out, it's a huge market opportunity. All gold ever mined is worth at least $9 trillion today, according to estimates by online coin dealer Golden Eagle Coin. If you assume that physical gold holds on to three-quarters of the global value-storage market it owns today, Bitcoin could be worth as much as $2.25 trillion when that balance is struck.
That's up from $386 billion today, which leaves room for more than a fivefold increase in Bitcoin prices -- landing just north of the $100,000 mark in the end. Of course, stingier or more generous estimates will move that target price back and forth, but that's the ballpark we're talking about.
And I'm not sure that the gold-replacement plan even accounts for the direct utility Bitcoin offers in frictionless digital payments. When did you last pay for your groceries with a gold coin? Sure, you probably aren't using Bitcoin that way either, but Amazon's Whole Foods Market actually accepts cryptocurrency payments today. A few years down the road, crypto-based payments could become as popular as credit cards and Zelle payments are today.
Where is Bitcoin going?
So the $100,000 price target actually looks like low-hanging fruit for Bitcoin. I'm assuming that cryptocurrencies are here to stay and that grandpa Bitcoin will remain the largest and most trusted cash-replacement option in the market for many years to come.
At the same time, I know that there's a bumpy road ahead and many things can still go wrong. Proper regulations and taxation systems are still under development in pretty much every country, including America. When lawmakers nail down their long-term rulebooks, it'll still take time to get consumers and businesses to embrace digital currencies. And of course, I can't guarantee with absolute certainty that Bitcoin won't be replaced by another cryptocurrency with similar goals and superior technology at some point.
So Bitcoin seems highly likely to ascend to that lofty $100,000 price target, but it's a risky trip with plenty of potholes. Don't expect a 400% return by the end of this year, or over the next couple of years. As the crypto market matures, the wild and unpredictable price swings we're getting so used to will become milder. Bitcoin has a lot of untapped growth left to explore, as long as you have plenty of time and unshakable patience. Otherwise, you might find this cryptocurrency (and any cryptocurrency on the market today) too frustrating in this market.