The target price for early 2024 is $100,000. Bitcoin (Cryptocurrency: BTC) It seemed easy. Bitcoin It had just risen more than 150% to a price of $45,000.Wall Street finally accepted Bitcoin as an asset class, and a new Bitcoin was on the horizon. Spot Bitcoin ETF It promised to bring new investor money into Bitcoin.
But the problem is that the whole theory of Bitcoin ETF investing isn’t working out as expected. In fact, since the Spot Bitcoin ETF began trading on January 11th, Bitcoin has actually fallen by nearly 10%. But don’t worry. Bitcoin ETF investment theory continues to evolve, and Bitcoin will see another big opportunity this year. Could these things combined be the rocket fuel needed to send Bitcoin skyrocketing?
Bitcoin ETF investment theory: sequel
The frustrating part of the original Bitcoin ETF investment theory is that the price of Bitcoin didn’t immediately spike in January. While the new Bitcoin ETF appears to be an early success, not all new purchases by Wall Street investors are pushing Bitcoin prices higher. Rather, investors appear to have simply moved funds from one Bitcoin investment product to another, with little or no material change in their overall exposure to Bitcoin.
So, as you might expect, we are already seeing an evolution of this original theory. At the end of January, Ark Invest released its new “Big Ideas 2024” report. In it, the investment firm includes some very bullish updates on how much Bitcoin investors should optimally allocate to their portfolios. Instead of the previous guideline of 6.2%, we now propose a much higher optimal Bitcoin allocation of 19.4%.
This is a fundamental change and also leads to a significant price target for Bitcoin. Using a 19.4% assumption and applying it to a total global investable asset base of $250 trillion, Bitcoin’s target price could reach $2.3 million, according to Ark Invest. Essentially, this will be a world where every investor is excited about Bitcoin. Imagine not only the biggest institutional investors on Wall Street, but also the biggest sovereign wealth funds moving a fifth of their assets into Bitcoin.
Obviously, how high Bitcoin goes this year will largely depend on how much of their portfolio investors are willing to allocate to the cryptocurrency. Assuming that 1% is still a general rule of thumb for most investors, reaching $100,000 may be harder than originally expected. But if there is a willingness to turn the dial and increase that allocation percentage up to 5%, 10%, or even his 20%, Bitcoin could completely reach the stratosphere.
Bitcoin halving
But the Bitcoin ETF story may not be the biggest story for Bitcoin this year. The long-awaited Bitcoin halving will arrive in April, potentially unlocking enormous value for the cryptocurrency. There have been three Bitcoin halvings in the past (2012, 2016, and 2020), each of which resulted in impressive gains. For example, the halving in 2020 ultimately caused Bitcoin to reach an all-time high of around $69,000.
So, will Bitcoin reach new all-time highs again? Obviously, past performance is no guarantee of future performance, so it’s dangerous to think that Bitcoin will skyrocket again this time. Additionally, keep in mind that it may take 12 to 18 months for all of your profits to be halved. This means that the true magnitude of Bitcoin’s halving rally may not be known until sometime in 2025.
However, as with the Bitcoin ETF investment theory, the Bitcoin halving theory seems to make a lot of sense. During a halving, the mining reward paid to Bitcoin miners for adding new blocks to the Bitcoin blockchain is cut in half. This has two important consequences. First, it increases the relative scarcity of Bitcoin. Second, Bitcoin’s deflationary tendencies will increase over time. Both of these results should make Bitcoin even more attractive to investors in the long run.
What could go wrong?
My biggest fear is that as Bitcoin becomes more and more mainstream, it will start to behave differently than it has in the past. For example, consider Bitcoin’s famous (some might say infamous) volatility. With so many institutional investors deciding to buy Bitcoin for their portfolios, and many employing buy-and-hold strategies, it is unlikely that Bitcoin’s volatility will decrease over time. It’s not impossible.
This reduced volatility is great if you want a safe, good investment that you don’t have to check every 24 hours. But if you want the kind of rocket ship movement required to achieve a price tag of $100,000 or more, it’s terrible.
As a result, I’m starting to readjust my expectations for Bitcoin. We expect the fluctuations to decrease over time. And as it becomes more mainstream, I expect it to become more correlated with traditional asset classes. Combined, this could cause Bitcoin price movements to be less aggressive than they have been in the past. However, with that said, I remain long-term bullish on Bitcoin and think it still has the potential to break through the $100,000 level by the end of this year.
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dominique basselt I have a position in Bitcoin. The Motley Fool has a position in and recommends Bitcoin. The Motley Fool has Disclosure policy.
Will Bitcoin reach $100,000 in 2024? Originally published by The Motley Fool
