Bitcoin’s price is unlikely to hit an all-time high before it halves – here’s why.
For investors, a bullish turn on Bitcoin is tempting, especially after a 91% rally to $52,000 ending on February 15. Bitcoin's current $1 trillion valuation is ahead of the world's top 10 trading assets and Warren Buffett's world. The famous Berkshire Hathaway with a market capitalization of $875 billion.
The additional 34.5% gain needed for Bitcoin to reach $70,000 from its current level of $52,000 would represent a $350 billion increase in BTC capitalization. This move puts cryptocurrency ahead of silver and the UK pound, including bank deposits and currency accounts. The main question is whether current conditions support Bitcoin's $1.35 trillion valuation.
One could argue that Bitcoin has cleared those barriers when it hits an all-time high of $69,000 in November 2021. The adoption of spot Bitcoin ETFs in the United States and some concerns, such as the Binance court bankruptcy procedures from the regulators and FTX exchange, have been resolved, it seems more likely now to repeat that activity.
Bitcoin's all-time high price has been fueled by low interest rates and high inflation
Traditional finance fixed income yields were below 0.50% in November 2021, prompting investors to seek riskier assets for higher yields. US inflation, as measured by the Consumer Price Index (CPI), rose to 6.8% year-on-year in November 2021. -19 impact on economic activity.
The latest CPI inflation data for January 2024 shows a year-on-year increase of 3.1%, which remains above the US Federal Reserve's guidance but remains modest. It may be naïve to think that the current rate of inflation poses a risk comparable to Bitcoin's all-time highs. The data shows that investors expect 10.9% earnings growth for S&P 500 companies, up from 3.8% in 2023. Therefore, investors have little incentive to look for alternative assets compared to the end of 2021.
Related: A Micro-Strategy List in the S&P 500 Index Could Expose Millions to Bitcoin
Spot ETFs turn Bitcoin into a mature asset class
Since its launch on January 11, the spot Bitcoin ETF industry has amassed an impressive $4 billion in net inflows in the US, more than $35 billion, or 3.5% of Bitcoin's market capitalization. By comparison, the gold ETF's collective holdings amount to $210 billion, equivalent to 3% of its market capitalization if ~50% is used for jewelry and medals. This does not indicate that Bitcoin's ETF is approaching its limit, but it does give a rough indication that the asset class is more mature than November 2021.
A significant selling point for Bitcoin is the resulting institutional income. Yet, the price is less than 25% of the $69,000 maximum, or lower when adjusted for inflation or the overall money supply.
Bitcoin adoption has increased, but bullish predictions of $100,000 or more have failed to materialize. On the bright side, a $3 trillion market capitalization company by November 2021 was a distant dream, but it has become a reality for Microsoft and Apple. So, as long as the dollar continues to decline, there is hope that Bitcoin will rise above $70,000, but it won't happen before the April halving.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
