Bitcoin (BTC -2.31%) is now trading above $50,000 for the first time since December 2021. That's a huge milestone for the world's most popular cryptocurrency, and the best sign to date that Bitcoin is finally back after a long, painful crypto winter.
The big question is just how much higher Bitcoin can go this year. While the new consensus seems to be that it is headed higher, there are several scenarios for how it might play out. Let's take a closer look.
Scenario 1: Bitcoin continues to trade around $50,000
While it's certainly impressive that Bitcoin just broke through the $50,000 level, this is exactly what was supposed to happen when the Securities and Exchange Commission approved the new spot Bitcoin exchange-traded funds (ETFs) in January. The arrival of a new Bitcoin investment product with the blessing of government regulators meant a huge influx of funds from investors, and all of that new money was bound to push up the price of the crypto sooner or later.
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Based on the initial euphoria around the spot Bitcoin ETF narrative, both BlackRock (BLK 0.69%) and Fidelity Investments have pulled in nearly $3 billion from investors, and there has been a steady influx of new money across nearly a dozen different spot Bitcoin ETFs. Clearly, both retail and institutional investors are looking for access to the price upside of the digital currency. As long as investors decide to cap their crypto allocation to around 1%, though, it will likely continue to trade around $50,000.
Scenario 2: Bitcoin hits a new all-time high above $70,000
And that brings us to our second scenario: Bitcoin hits a new all-time high above the $69,000 level, which it reached in November 2021. Most likely, the ETF narrative by itself is not enough to send the crypto to that level. But there's another event that could: the upcoming Bitcoin halving, now scheduled for mid-April.
These halving events only take place once every four years, and they tend to lead to spectacular breakout rallies. In a halving event, the reward paid out to Bitcoin miners is reduced by one-half, and that leads to greater scarcity. In three previous halving cycles (2012, 2016, and 2020), this change to the coin supply has led to a steep rise in its price.
It was on the basis of the previous halving event (in May 2020) that Bitcoin soared to an all-time-high, so it's not out of the question that the April 2024 halving event could have a similar result. In fact, some analysts think that Bitcoin is already in its pre-halving rally. Just keep in mind that it typically takes 12 to 18 months for the token to hit a new high after a halving, so it might take until early to mid-2025 before it surges past the $69,000 mark.
Scenario 3: Bitcoin surges through $100,000 on the way to $1 million
Lastly, there's the super-bullish scenario of Bitcoin skyrocketing past $100,000 on its way to $1 million. This is what some very smart investors think could happen next. For example, Standard Chartered (SCBF.F 1.12%), a multinational British bank, thinks that Bitcoin will hit $100,000 by the end of the year. And Cathie Wood of Ark Invest thinks that it could eventually top $2 million per coin by 2030.
For that to happen, a lot would have to go right. For one, institutional investors would have to crank up their Bitcoin allocations. As Ark Invest recently acknowledged, it would take an allocation of 19.4% of their asset base from institutional investors to make this scenario happen.
At the same time, Bitcoin would need to continue to gain in overall market adoption and become more mainstream as a form of payment. More uses and more adoption mean greater demand. And all of that new demand could push up Bitcoin to truly incredible levels.
The takeaway for Bitcoin investors
The big takeaway from all this is to focus on the long-term outlook, not all the short-term twists and turns. Trying to time a Bitcoin price movement is difficult, if not impossible.
Just look at all the experts who predicted that the crypto would immediately soar in value after spot Bitcoin ETFs were approved. Instead, it immediately sank to the $40,000 level.
Over the long run, I can't think of a better buy-and-hold investment than Bitcoin. Now that it has the approval of both Wall Street and government regulators, it could be ready for another spectacular rally.
