It's hard to believe that Bitcoin (BTC -2.30%) was in the depths of a brutal crypto winter just a year ago, falling as low as $16,735. Fast-forward to today, and Bitcoin is up more than 160% in 2023, hitting a yearly high of just over $43,000. By all accounts, the crypto winter has thawed.
This level of resurgence isn't uncommon for Bitcoin, especially after bear markets. However, it does raise the question: How much more momentum could Bitcoin have? Could it ride this wave and reach the coveted six-figure mark of $100,000 in 2024, or would that be too big of a jump too fast?
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Getting the lay of the land
For Bitcoin to reach $100,000, it would need to increase by another 130%. Considering Bitcoin has notched average yearly returns of 167% over the course of its existence, it is undoubtedly within the realm of possibility. But just how likely is it?
To answer this question holistically, we need to explore a handful of other developments, rather than just taking the average of Bitcoin's performance in years past. In doing so, we should be able to project Bitcoin's path in 2024 more confidently.
To reiterate, this is all pure speculation. But by taking a comprehensive view of data, recent trends, and history, one can hope to paint a reasonably accurate picture of Bitcoin's future.
The effect of the halving
While Bitcoin's performance in 2023 was impressive, it doesn't take away from the importance of what's coming in 2024. Hardwired into Bitcoin's code are events known as halvings. Every time another 210,000 blocks are added to the blockchain -- roughly every four years -- the amount of tokens paid to miners for validating transactions is cut by half. These halvings of the token supply growth rate alter the dynamics around Bitcoin's supply and demand.
The halving slated for April 2024 will cut Bitcoin's current growth rate of around 1.7% to just 0.85%. This might not sound like a big deal, but past data shows it profoundly affects Bitcoin's price.
In the previous years that halvings have taken place, Bitcoin's price has increased by an average of about 128% as the growth of the total token supply became more constrained. While past performance is no guarantee of future results, a 128% increase from today's prices would put it at just over $99,000.
Historically low supply
While halvings have historically been catalysts for price appreciation to a degree that would push it close to the $100,000 mark, additional developments in the Bitcoin universe could put that $100,000 level well within reach. Reason No. 1 is related to an existing supply crunch, which will only be amplified by the halving.
Bitcoin investors are notoriously stubborn about buying and holding through market fluctuations. Due to this behavior, investors have accumulated more Bitcoin at a historic rate over the last few years, pushing it into unprecedented territory. Data shows that the number of tokens available on exchanges increased until March 2020 (Bitcoin's last halving), peaking at nearly 3.2 million coins. But during this latest period of accumulation, the tradable supply has shrunk. It currently sits at 2.3 million tokens, a level last seen in the spring of 2018. As such, the upcoming halving will be the first in Bitcoin's history when fewer coins are on the market than during the previous one.
New game changers will add fresh demand
For years, Bitcoin investors claimed that deep-pocketed institutions would join the game. Well, now they're here. Some of Wall Street's biggest names, including BlackRock, Fidelity, and Franklin Templeton, are awaiting approval to sponsor spot Bitcoin exchange-traded funds (ETFs). With a blessing from the Securities and Exchange Commission (SEC) looking more likely by the day, the ETF will open the way for Bitcoin to be added to pensions, individual retirement accounts, and 401(k) savings accounts.
Last but not least is the renewed interest in Bitcoin development. For most of Bitcoin's history, its lack of functionality led to it being used primarily as a store of value or for speculation. But thanks to recent advancements, such as the development of Layer-2 solutions, Bitcoin can now be utilized in other ways -- to mint non-fungible tokens (NFTs), engage with DeFi platforms, or as a reliable payment solution.
A historically low supply combined with next year's halving leads me to believe $100,000 Bitcoin is in the cards for 2024. But that might only be scratching the surface of what's possible. As Bitcoin continues to push through traditional barriers and expand into the decentralized economy, its long-term value proposition only grows stronger. While I usually prefer to be conservative in my projections, a price of $100,000 per Bitcoin next year seems like a safe bet. But given Bitcoin's disruptive force, who knows what incredible potential lies beyond 2024?
