Thus far in 2023, Bitcoin (CRYPTO: BTC) has been one of the top performing cryptocurrencies, up more than 57%. Bitcoin trades for about $26,000 after briefly breaking through the $30,000 price level earlier this year.
But Bitcoin is still nowhere near its all-time high of $68,789, which it reached in November 2021. Nonetheless, a growing number of analysts, investors, and crypto enthusiasts still think that Bitcoin will break through the $100,000 level sometime in 2024. While that price trajectory might sound outrageous, there are three compelling reasons it might just happen.
Bitcoin as digital gold
The core argument around Bitcoin is that it functions as "digital gold," making it a good store of value, especially amid volatile economic conditions. Thus, during the banking crisis that kicked off earlier this year, investors looking for a safe-haven asset outside of the traditional banking and financial system turned to Bitcoin. And, indeed, the correlation between Bitcoin and gold has increased in 2023.
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If you buy into the argument that Bitcoin is digital gold, then it's possible to make a number of forward-looking price assumptions. For example, noteworthy Bitcoin investor Michael Saylor first calculated the value of the total physical supply of gold in the world (now about $13 trillion) and then proposed a similar valuation for Bitcoin. If you divide the market cap of gold by the maximum number of Bitcoins that will ever be in circulation (21 million), it is possible to come up with a $500,000 price target for Bitcoin. And Wall Street investment bank Goldman Sachs used roughly the same methodology back in January 2022 to come up with a $100,000 price target for Bitcoin.
Institutional adoption
OK, but what if you got burned by Bitcoin in 2022 and are still skeptical? Gold, after all, does not lose 65% of its value in one year. Fair enough. There's another route to the magical $100,000 price level, and it involves the long-term growth story around institutional adoption. Bitcoin, after all, is more than just a store of value. It is also a form of payment and a potential replacement for various building blocks of the modern financial system, including the U.S. dollar.
Noted investor Cathie Wood of Ark Invest, for example, has analyzed eight different use cases for Bitcoin in the global economic system. For example, Bitcoin is becoming part of the money supply of emerging market nations. And Bitcoin is also accounting for a larger and larger share of cross-border remittances. By taking a closer look at each of these eight areas, and then extrapolating growth rates going forward, Wood came up with a $1.48 million price target for Bitcoin.
The Bitcoin halving
Finally, there's one technical event that could influence the price of Bitcoin, known as the halving. This event occurs only once every four years, and is highly anticipated by the Bitcoin community. In a halving event, the reward paid to Bitcoin miners for mining a new block on the blockchain falls by one-half.
This might not sound like a big deal (unless you happen to be a Bitcoin miner), but it has tremendous consequences for the supply and demand of Bitcoin. For one, it slows the rate of Bitcoin's supply increase over time. Secondly, it increases the relative scarcity of Bitcoin. Theoretically, the combination of these two factors should help to push up the price of Bitcoin.
And, indeed, that is what has happened in three previous halving events. In the last halving, which took place in 2020, Bitcoin's price exploded by 688% and eventually neared its all-time high. Well, guess what? The next Bitcoin halving is scheduled for April 2024, and investors are already putting out aggressive price targets north of $100,000 for Bitcoin. For example, Standard Chartered Bank thinks Bitcoin will hit that figure by the end of 2024.
The path to $100,000
As can be seen, there are various paths that Bitcoin can take to reach $100,000. Although the price target might sound absurdly high, especially given the current macroeconomic environment, the potential is certainly there. Of course, there are wildcard factors, such as the Securities and Exchange Commission (SEC), which could move to regulate Bitcoin at any moment. And don't forget about the Federal Reserve, which has shown the ability to hammer the price of Bitcoin simply by hiking interest rates.
That said, I remain bullish on Bitcoin both short-term and long-term. While it is certainly a volatile digital asset, it has a long track record of market-beating performance that dates back nearly a decade. From my perspective, it is no longer a question of if Bitcoin will reach a price of $100,000, but when.
