Bitcoin's (BTC 2.80%) price has more than doubled to about $63,000 over the past 12 months. That rally was mainly driven by the approval of the first spot price Bitcoin ETFs in January, the halving of Bitcoin in April, and the market's expectations for lower interest rates.
Those catalysts drove some investors to make some extremely bullish predictions regarding Bitcoin's future. Ark Invest's Cathie Wood believes its price could hit $3.8 million by 2030, venture capitalist Chamath Palihapitiya sees a price of $1 million by 2040-2042, and Fidelity claims that its price could reach a whopping $1 billion by 2028-2030.
Image source: Getty Images.
It's impossible to tell if Bitcoin will come anywhere close to those estimates, so most investors should focus on its realistic upside potential instead of those lofty price targets. I think Bitcoin has a viable path toward reaching $100,000 by the end of 2025, which still makes it a good bet for investors who can stomach the near-term volatility.
Bitcoin would only need to replicate its average annual gains
From Jan. 1, 2014, to Jan. 1, 2024, Bitcoin's price rose from $771.40 to $43,835.62. That represented a 10-year compound annual growth rate (CAGR) of 50%. A 50% gain this year would boost Bitcoin's price to $65,800 by Jan. 1, 2025, while another 50% gain would drive its price to $98,700 by Jan. 1, 2026. So if Bitcoin merely replicates its average annual growth rate from the past decade, its price could approach $100,000 by the end of 2025.
CRYPTO: BTC
Key Data Points
Another factor is Bitcoin's performance after each halving, which reduces the rewards for mining the cryptocurrency every four years. Let's look back at Bitcoin's price after each of the three halvings that occurred in 2012, 2016, and 2020.
|
Halving Date |
Price at the Time of Halving |
Following Year's Peak Price |
|---|---|---|
|
2012 |
$13 |
$1,152 |
|
2016 |
$664 |
$17,760 |
|
2020 |
$9,734 |
$67,549 |
Data source: Bitpay.
Bitcoin's post-halving returns are diminishing, but that trajectory suggests its price could still rise significantly after its latest halving, which occurred on April 19, 2024. Bitcoin's price closed at $63,844 on that day. It's still hovering around that level as of this writing, but the historical data suggests it could easily climb above $100,000 by 2025.
Institutional purchases could turn the tide
Bitcoin's bulls believe that institutional purchases will drive its price to new all-time highs. According to a recent EY-Parthenon survey, 76% of institutional investors still allocated less than 5% of their portfolios to Bitcoin and other digital assets.
Cathie Wood has repeatedly claimed that if institutional investors just added "a little more than 5% of their portfolios to Bitcoin," its price would soar into the millions. Wood believes the recent approvals of Bitcoin's spot-price ETFs -- which make it easier for institutional investors to buy the cryptocurrency -- will fuel that trend.
The Federal Reserve won't cut interest rates anytime soon, but it also said it wouldn't raise rates for the foreseeable future. That stability might drive more institutional investors to load up on Bitcoin and more speculative investments this year.
Meanwhile, more businesses could accept Bitcoin for payments, while more inflation-ravaged countries could follow El Salvador's lead and adopt it as a national currency. That trend would bolster its reputation as a safe-haven asset and make it more comparable to gold, silver, and other precious metals. The U.S. Securities and Exchange Commission supports that view: it's repeatedly said that Bitcoin is the only cryptocurrency that's a commodity instead of a security.
But investors should brace for some volatile swings
I believe Bitcoin's price has a clear path toward hitting $100,000 by the end of 2025, but it will probably endure some volatile swings before it hits that target. Therefore, investors should assess the near-term risks instead of blindly following the bulls.
