Bitcoin's (BTC -3.11%) price hit a record high of nearly $124,500 on Aug. 14. That marked a gain of more than 110% over the previous 12 months. It's pulled back to about $113,000 as of this writing, but some analysts expect it to soar even higher through the end of the year.
Back in May, Fred Krueger, a market analyst and mathematician, predicted Bitcoin's price would surge to $600,000 by October. That's a bold forecast that surpasses my own estimate for Bitcoin reaching $200,000 within the next year, but does it hold any water? Let's compare the current catalysts for Bitcoin to Kreuger's bullish outlook to decide.
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What are the current tailwinds for Bitcoin?
Bitcoin's rally over the past year was driven by four tailwinds. First, declining interest rates softened the U.S. dollar and highlighted Bitcoin's strengths as an inflation-resistant asset. Lower rates also drove investors toward cryptocurrencies and riskier investments again.
Second, Bitcoin's halving last April, which cut the rewards for mining the token in half, made it even harder to mine the world's top cryptocurrency. That was bad news for miners, but it was great news for investors because it tightened up its supply as the market's demand swelled. That next four-year halving will occur in 2028.
Third, the Securities and Exchange Commission (SEC) approved the first spot price exchange-traded funds (ETFs) for Bitcoin last January. Those approvals supported the bullish argument that Bitcoin was "digital gold" and made it easier to invest in the cryptocurrency. Lastly, Bitcoin was more broadly adopted by large companies, institutional investors, and governments across the world. Countries like El Salvador and the Central African Republic ramped up their purchases of Bitcoin as a hedge against currency devaluation challenges, and the U.S. even set up a Strategic Bitcoin Reserve to store its accumulated Bitcoin.
Could Bitcoin really reach $600,000 over the next two months?
I expect those tailwinds to drive Bitcoin's price to $200,000 over the next year, but Krueger's $600,000 target for October is pinned to a doomsday scenario for the U.S. dollar. Krueger expected a "failed" $200 billion U.S. Treasury auction on July 21 to trigger a collapse in the U.S. dollar and drive more investors toward Bitcoin. But that auction was uneventful and the U.S. dollar actually firmed up over the past month.
Krueger also predicted the BRICS countries would launch their own gold and Bitcoin-settled payment system to curb their dependence on the U.S. dollar. By August, he expected Venezuela, Turkey, and Nigeria to shift their foreign reserves into Bitcoin. But none of those seismic shifts actually happened. The closest project is BRICS Pay, a blockchain-powered payment platform for cross-border transactions, but those payments are still being settled in local currencies.
By September, Krueger expected U.S. Treasury yields to jump above 8.5%, real estate prices to drop by an average of 35%, and the S&P 500 to crash about 50%. But as of this writing, the 10-Year Treasury has a 4.3% yield, the U.S. real estate market is only slightly cooling off, and the S&P 500 hovers near its all-time highs.
By October, Krueger claimed that many of the top tech companies would be aggressively accumulating Bitcoin as the U.S. dollar collapsed, and that the U.S. would restructure the U.S. dollar to be backed up by 25% gold and 25% Bitcoin. Yet neither of those things seem likely to occur. Only a few tech companies like Strategy (MSTR 6.09%) are actively hoarding Bitcoin, and the U.S. wouldn't abruptly back the U.S. dollar with gold and Bitcoin as long as its price remained stable.
Investors should maintain more realistic expectations
In Krueger's wild scenario, Bitcoin might skyrocket to $600,000 within the next two months if the U.S. dollar collapses, the stock market crashes, and interest rates skyrocket. But such a downturn would also likely drive investors away from more speculative investments like cryptocurrencies -- even "blue chip" ones like Bitcoin -- and toward time-tested assets like gold. That's why I don't think Krueger's price target is rooted in reality. I'm still bullish on Bitcoin, since I believe it's gradually becoming an inflation-resistant asset like gold, but investors should take any headline-grabbing, short-term price targets with a grain of salt.
