With Bitcoin (BTC 1.11%) currently trading for less than $70,000, it might seem inconceivable that it could more than double in value to hit a price of $150,000 this year. Yet, that's exactly what some top Wall Street firms are now predicting.
So what are some of the catalysts that could send Bitcoin soaring this year? Let's take a closer look.
Market sentiment
Right now, the Crypto Fear & Greed Index is sitting near all-time lows. It currently reads 13 out of a possible 100, indicating extreme fear.
Image source: Getty Images.
You can interpret that ultra-low reading in one of two ways. It could be a clear red flag that something is deeply wrong with Bitcoin. Or, if you're an eternal optimist, it could be a sign of total investor capitulation. It can't get any worse than it is right now.
From my perspective, there are a number of factors that could result in a positive shift in market sentiment. Any signal of further interest rate cuts by the Federal Reserve could trigger a new risk-on mentality, leading to an inflow of new money into crypto and Bitcoin. The passage of new pending crypto legislation later this year, too, could help to reverse the tide on market sentiment.
Money on the sidelines
Another way to think about the current Bitcoin situation is in terms of money on the sidelines. In other words, there's money just waiting to flow into Bitcoin, but investors are hesitant to do so right now given the terrible market sentiment. After all, Bitcoin is down more than 20% to start the year.
CRYPTO: BTC
Key Data Points
One way to quantify this is by looking at how much money is currently sitting in stablecoins, which are essentially digital dollars. In a risk-off environment, money flows into stablecoins for safekeeping. In a risk-on environment, money flows out of stablecoins and into Bitcoin and other cryptocurrencies.
The metric that many investors are focused on right now compares the market cap of Tether (USDT +0.00%), the world's largest stablecoin, to the total market cap of the crypto market. If this metric is in the 8% to 10% range, then money is waiting patiently, ready to be deployed. Right now, the ratio sits at 8%. That leads me to think that money is being held back and is set to flow into Bitcoin.
Higher Bitcoin allocations
Another factor that could send Bitcoin higher is a higher allocation to crypto from institutional investors. Historically, their allocation to crypto has been minimal, given the perceived riskiness of the crypto asset class.
However, BlackRock (BLK 3.02%) recently ran the numbers for Asian institutional investors and calculated that even a relatively tiny 1% allocation could lead to a titanic $2 trillion flow into crypto. Presumably, much of that money would head to Bitcoin.
Strategic Bitcoin Reserve
And don't forget about the Strategic Bitcoin Reserve, which was created in last March to hold the U.S. government's Bitcoin, instead of selling it as in the past. If the Trump administration moves ahead with aggressive Bitcoin buying for the reserve, as some are now imploring the U.S. Treasury to do, then the price of Bitcoin could skyrocket.
Is a price of $150,000 realistic?
Putting it all together, there are a number of powerful catalysts that could send Bitcoin's price higher. If even one of them delivers as anticipated, Bitcoin could easily regain the crucial $100,000 price level, boosting investor sentiment.
Just a few months ago, Bitcoin traded for more than $126,000. Viewed from this perspective, a march to $150,000 doesn't seem nearly as improbable as it might at the moment.
