With Bitcoin (BTC -1.66%) down more than 25% for the year, it's no surprise that investors are abandoning the crypto market in droves. They are looking for better opportunities elsewhere and are finding them in fields such as artificial intelligence (AI) and space exploration.
But it may be too soon to write off Bitcoin. According to Bitwise CIO Matt Hougan, Bitcoin is at a turning point right now and could be "substantially higher" by year-end.
The bull scenario for Bitcoin
Admittedly, it's getting harder and harder to make the bull case for Bitcoin. As Hougan points out, there is only one primary use case for Bitcoin these days: as a store of value.
Bitcoin is supposed to be "digital gold," a safe-haven asset, and a hedge against both inflation and geopolitical risk. If that's really the case, then why is Bitcoin tanking so hard this year?
Image source: Getty Images.
According to Hougan, investors need to take a long-term perspective on Bitcoin rather than focusing on short-term ups and downs. Bitcoin typically trades in four-year cycles of boom and bust, so investors need to be willing to wait out the lean years. When the good years return, they do so with gusto.
Just think back to the previous Bitcoin bear market. In 2022, Bitcoin lost 64% of its value, and many investors abandoned it, just as they are doing now. But in 2023 and 2024, Bitcoin delivered triple-digit returns to investors and proved the skeptics wrong.
From a long-term perspective, Bitcoin has stood up surprisingly well as a store of value. Over the past decade, Bitcoin has increased by 10,000%. By way of comparison, the U.S. dollar has lost 28% of its value in just the past six years. So that's reassuring news for long-term investors who view Bitcoin as a digital alternative to traditional fiat currencies.
What does "substantially higher" really mean?
Even as Bitcoin continues to flounder below $70,000, plenty of analysts think it could hit $100,000 (or higher) by year-end. For example, investment firm Bernstein just reiterated its $150,000 price target for Bitcoin.
CRYPTO: BTC
Key Data Points
If that's the case, Bitcoin might have 135% upside from here. At a time when the warning bells are starting to ring for richly priced AI and space exploration stocks, investors might rotate back into Bitcoin for its explosive upside potential.
For that reason, I'm still bullish on Bitcoin. Even though prediction markets continue to give Bitcoin only a 16% chance of clearing $100,000 this year, I'm convinced that the four-year Bitcoin cycle is shifting into bull market mode, and I don't want to miss the early rally.
