Bitcoin (BTC +2.61%) continues to fall out of favor. The world's leading cryptocurrency is having a rough start to the year, down 11% (as of Feb. 1). And it trades 39% lower than its record from October last year.
The latest dip might be due to investors' perception of President Donald Trump's nominee for Federal Reserve Chair, Kevin Warsh. He has historically had a hawkish philosophy on monetary policy. That is leading to market pessimism, as most investors probably want to be confident that lower interest rates are coming.
It's easy to be bearish on Bitcoin when its price chart is in the red. But I believe the top digital asset will have a good year, rising 29% from the current price of about $77,500 to hit $100,000 before 2026 comes to a close.
Image source: Getty Images.
Bitcoin is still a risk-on asset
The best way for many investors to understand Bitcoin's value proposition is to call it a digital version of gold. Like the shiny metal, the cryptocurrency is global and neutral. Bitcoin is certainly more volatile, and it has a shorter life span. But it's much more portable and transactable than gold is.
And Bitcoin's scarcity, with a hard cap of 21 million units, is its best feature. Predetermined halving events, occurring roughly every four years, add predictably, as everyone knows the amount and timing of new Bitcoin units being issued. Consequently, supporters view this as a compelling store-of-value asset.
Not everyone is on board, however. The market at large isn't buying this narrative yet. Bitcoin is still a risk-on asset. This is clear by the impressive rise in the price of gold, as central banks accumulate the metal in the face of geopolitical risk, dollar weakness, and huge sovereign debt.
I adopt a different view. Combined, all of Bitcoin's favorable characteristics are why its price will continue to rise in the long run, in my opinion.
CRYPTO: BTC
Key Data Points
No one knows what will happen
The macro layout shouldn't be ignored. And I believe it will propel Bitcoin this year, as it benefits from greater liquidity entering the system. The U.S. federal debt burden keeps expanding. The M2 money supply of the four biggest central banks has risen by 10% in the past 12 months, approaching $100 trillion.
And Warsh, who might have supported tighter monetary policy in the past, actually supports lower interest rates now. These are all beneficial to risk-on assets.
Even though I expect Bitcoin to climb 29% to $100,000 this year, it's important to realize that making accurate price predictions is an incredibly difficult thing to do. it's anyone's guess where Bitcoin will end up in late December. I remain bullish both in the near term and the long term.
And it's worth mentioning that investors who are considering buying this cryptocurrency should only do so if they are willing to own it for five or 10 years.
