The entire cryptocurrency market climbed 66% from just before Donald Trump's election win in November to mid-December. Since then, however, many of the most popular cryptocurrencies have failed to continue moving higher.
Bitcoin (BTC -2.66%) has been one of the stronger performers. It set an all-time high in January, and it recently climbed slightly above that level in May. As of June 18, Bitcoin trades for about $105,000.
But multiple analysts see the value of Bitcoin nearly doubling by the end of the year, reaching $200,000. Here's why analysts are bullish on the leading cryptocurrency.
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Doubling in just over six months
Over the last couple of months, several analysts have reaffirmed expectations for Bitcoin to climb to $200,000 by the end of the year.
- Bernstein called its $200,000 year-end estimate for Bitcoin "high-conviction and conservative."
- Standard Chartered analysts called for a series of sharp increases during the next few months that could push the price to $200,000 by year-end.
- Bitwise analysts think the fair value of Bitcoin right now is $230,000 but only expect it to reach $200,000 by the end of the year.
- 21Shares strategists also see the cryptocurrency hitting the magic $200,000 mark by year-end as well.
There are several factors supporting the continued increase in Bitcoin's value, according to the analysts.
Bitwise points to the rising U.S. fiscal debt, exacerbated by the new tax bill that passed through the House recently. Analysts argue that Bitcoin presents a type of insurance against sovereign debt defaults since it's a scarce and decentralized asset.
Standard Chartered is seeing data that shows the market agrees with that sentiment. It said exchange-traded fund (ETF) flows are shifting from gold into Bitcoin, suggesting it's more of a safe asset. It also says Bitcoin wallets with more than 1,000 Bitcoins resumed accumulating the asset during recent dips.
21Shares saw the recent Consumer Price Index numbers as a bullish sign for Bitcoin because cooler inflation could give the Federal Reserve the green light to reduce interest rates. That could push wider adoption of riskier assets.
But there's one trend that could drive Bitcoin's price higher well beyond 2025, and it appears to be accelerating.
CRYPTO: BTC
Key Data Points
What can drive Bitcoin long term?
Bitcoin's price is based almost entirely on supply and demand. There's a fixed supply of Bitcoin -- only 21 million will ever exist, of which about 19.9 million are already in circulation. So, strong growth in demand will send its value up over time.
To that end, we're seeing signs of more growth in demand. ETF inflows have reaccelerated after a pullback in March and April. On top of that, there's growing interest in Bitcoin treasury companies that aim to follow in the footsteps of Strategy, formerly known as MicroStrategy, whose main business is buying and holding Bitcoin.
We saw a new pure play on the Strategy Bitcoin treasury idea, Twenty One, agreeing to go public in late April. Trump Media raised $2.5 billion to establish a Bitcoin treasury at the end of May. Several other businesses have taken to the idea of selling shares in their company to buy Bitcoin, injecting billions of dollars of demand and a continuous flow of more demand in the future.
So, not only is there more institutional interest in buying Bitcoin, but there's growing corporate interest as well. The current political environment is making it easier for both to confidently hold Bitcoin on their books, so the trend should continue for a long time.
Most investors can easily invest in Bitcoin through their regular brokerage account by purchasing a Bitcoin ETF. The expense ratios on the best Bitcoin ETFs are relatively low and worth paying for the simplicity and security they provide.
If you'd rather buy Bitcoin directly, opening an account on a crypto exchange isn't difficult, but beware of the hidden costs of crypto transactions, including slippage and take rates from exchanges. You'll also need to remain mindful of security concerns regarding custody of your Bitcoin.
