How can bitcoin reach $1 million per year?

In a recent post on social media platform X, cryptocurrency analyst Bit Payne made a plausible prediction that the price of Bitcoin (BTC) will reach $1 million on January 3, 2025.

Paine provides an in-depth analysis, highlighting the key factors that can lead to this significant increase in value.

An analyst predicts a possible supply shock on the Bitcoin market

Payne's analysis is that in the next five years, approximately 750,000 new bitcoins are expected to be produced during this period. Based on historical patterns, the analyst estimates that 20-30% of the Bitcoin supply will probably be available for sale in the upcoming bull market.

The math behind $1M / #BTC on January 3, 2025 is simple:

750,000 #BTC will be mined in the next 5 years.

According to previous cycles, 20-30% of the supply will be available for sale in the bull.

For many I think it will be less than previous cycles (~10-15%).

— Bit Paine ⚡️ (@BitPaine) January 2, 2024

However, Payne differs from traditional expectations, showing a more conservative estimate of 10-15% for several reasons.

These include the recent emergence from an extended bear market, the rise of Bitcoin maxi hodlers, the declining importance of “crypto” as an overall asset class (due to reduced interest in diverting funds to alternative cryptocurrencies or “alts”), and Increasing recognition of Bitcoin as a form of treasury.

In these estimates, Payne estimates that an additional 2-6 million bitcoins will enter the market, bringing the total supply to about 2.75-6.75 million.

The reason for the proposed increase is the expected influx of capital into the Bitcoin market. Payne is poised to inject $1-5 trillion of capital into the market over the next five years, driven by the increasing accessibility of wealth to institutional and retail investors alike.

Payne's analysis agrees with the notion that most of the gains in the Bitcoin market occur in the first year after a halving event, typically defined by speculative enthusiasm. Subsequently, more gradual dividend growth is expected.

Bitcoin rises above $45,000 and then drops

Bitcoin surpassed $45,000 on Tuesday, its highest level since April 2022. The cryptocurrency hit a 21-month high of $45,922, marking a strong start to the new year.

Investors' attention is focused on the US Securities and Exchange Commission's (SEC) approval of the Spot Bitcoin ETF. Such approval is expected to open up the market to a wider investor base and attract significant investments.

However, the landscape changed during the day as BTC fell by $3,000. This comes amid reports that the US securities regulator may reject all spot ETF applications in January, as it has done countless times in January.