Year to date, Bitcoin (CRYPTO: BTC) is up 78%, and that's after a minor pullback that saw it lose nearly 10% of its value after briefly touching the $30,000 level for the first time in nearly 10 months. At the same time, Bitcoin continues to outperform just about every other major cryptocurrency.
But just how much higher can Bitcoin go? In mid-April, Standard Chartered Bank issued a new price target of $100,000 for Bitcoin for year-end 2024. At current prices, that would suggest a monster rally that sees Bitcoin more than triple in value in less than 20 months. So let's dive into some of the assumptions used to create that $100,000 price target.
The case for Bitcoin at $100,000
A big reason Bitcoin might explode in value has to do with the current macroeconomic environment. According to Standard Chartered Bank, the "crypto winter" is officially over now, and people can go back to investing in crypto. Moreover, if you buy into the assumption that the Federal Reserve has finished tightening and will now leave interest rates alone or even cut them before too long, then that is obviously going to be a huge positive for the entire crypto market. Risk assets such as Bitcoin tend to flourish when rates are low or declining.
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At the same time, Bitcoin is regaining its status as a "safe haven" asset that people put their money into when things look dicey in the broader economy. After the first stage of the banking crisis involving Silicon Valley Bank, some people rushed to take their money out of traditional banks and put it into Bitcoin, which they perceived as being a superior store of value. The same thing seems to be happening now with First Republic Bank (FRC +0.00%), with Bitcoin suddenly increasing in value after a brief pullback.
But can Bitcoin triple in value?
OK, that all sounds great, but is it really enough to propel Bitcoin to $100,000? Keep in mind that the all-time high for Bitcoin is $68,789.63. So not only is Bitcoin going to face a tremendous amount of resistance fighting through the $40,000 level, the $50,000 level, and the $60,000 level, but it's also going to face an epic battle hitting a new all-time high at the $70,000 level. We've already seen a foreshadowing of this with Bitcoin at $30,000, when it immediately pulled back.
I think the market is going to need a huge new catalyst to propel Bitcoin to stratospheric new heights. Standard Chartered Bank mentioned a few other factors that might help Bitcoin -- such as the increasing profitability of Bitcoin miners -- but all of these seem like minor, technical factors rather than big breakthrough catalysts.
The Bitcoin halving
However, one factor that Standard Chartered Bank alluded to might just be big enough to propel Bitcoin to $100,000. This is an event known as the Bitcoin halving, and it takes place only once every four years. The next Bitcoin halving takes place in 2024 and is already being talked up in crypto circles as a huge opportunity for Bitcoin investors.
In a halving event, the reward for mining a block of Bitcoin falls by half. Right now, miners get 6.25 Bitcoins every time they add a new block to the Bitcoin blockchain. However, in April 2024, that reward will fall to 3.125 Bitcoins. That might not sound like a big deal, but it actually has huge implications for how Bitcoin trades. After each halving, Bitcoin becomes more scarce and more deflationary. Both of these factors, theoretically, should boost its value.
And, indeed, in past halving cycles, the results have been dramatic. Crypto hedge fund Pantera Capital has modeled past Bitcoin halving cycles and found that Bitcoin tends to rise in value in the 477 days prior to the halving and then explode in value afterward. As a result, back in November, Pantera thought Bitcoin could hit $36,000 by early 2024 and then skyrocket to $149,000.
Caveats
Just remember that past performance is no guarantee of future performance. And the impact of each Bitcoin halving cycle appears to be diminishing, so it might not be realistic to expect the same types of gains that we saw in 2012, 2016, or 2020. And, finally, it's worth noting that Standard Chartered Bank actually predicted in December that Bitcoin might crash to the $5,000 level in 2023, so it's safe to say that nobody really knows what Bitcoin will do this year.
But if you're looking for a reason why Bitcoin might hit the $100,000 mark in 2024, I think it has to be the next Bitcoin halving cycle. Fed easing is going to make it more likely that Bitcoin gets initial lift-off. A better overall macroeconomic outlook for the U.S. economy could reduce friction enough for Bitcoin to hit escape velocity. But for Bitcoin to skyrocket to the moon, it is going to need the fuel provided by the halving. As we near the midway point of 2023, look for discussion of this factor to dominate any future predictions of Bitcoin price performance in 2024.
