At the beginning of 2021, the world's largest cryptocurrency, bitcoin (CRYPT: BTC), exceeded $50,000 per coin for the first time. After falling around 75% from its all-time high in the inflation-driven crisis of 2022, the cryptocurrency had a lot of ground to make up. But on February 12, Bitcoin finally surpassed $50,000 once again.
The price of Bitcoin is rising at an incredible rate. As of this writing, it is up over 130% over the past year and over 20% in the past month alone. At this rate, investors might wonder if Bitcoin will be able to surpass $60,000 before the summer.
The answer is "yes": Bitcoin can surpass $60,000 before the summer. Here's why I believe it.
Why Bitcoin may continue to rise
When it comes to the future price of bitcoin, the key question to consider is whether there will be a wave of purchasing demand from new and existing adopters. In other words, are there incentives to buy and hold Bitcoin right now?
There are multiple reasons to believe that people and institutions are buying and holding Bitcoin right now. Here are some to consider.
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The first 11 Bitcoin spot ETFs have just been approved and started trading. Consider that there is a learning curve to purchasing cryptocurrency through an exchange or attempting self-custody, and easy-to-use exchange-traded funds (ETFs) overcome that hurdle. These spot price ETFs could enjoy rapid adoption because they allow people to invest in Bitcoin as they would stocks, reducing complexity. According to data from CoinShares, inflows into these ETFs are gaining momentum, with over $1 billion in weekly inflows.
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Institutional adoption is another important point. Companies like Microstrategy (NASDAQ: MSTR) Don't be afraid to be among the early adopters of Bitcoin: the technology company had more than 190,000 bitcoins as of February 5. But even the institutions that used to be against Bitcoin is now warming to the idea. For example, Black Rock CEO Larry Fink once said Bitcoin was a โmoney laundering index,โ but more recently praised it and called it โdigital goldโ in an interview with Fox Business.
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Similar to institutional adoption, there are many well-funded cryptocurrency companies that also own Bitcoin. I point out that they are well funded because this means they will not be pressured to sell their holdings for liquidity reasons. For example, Bitcoin mining company. Digital Marathon (NASDAQ: MARA) It has more than $300 million in cash, mitigating its need to sell any of its nearly 16,000 bitcoins anytime soon. Also, stable currency Tie generates interest income on the cash it holds in reserves. With this income, he also invests in Bitcoin and now reportedly owns more than 66,000 bitcoins.
Between Bitcoin ETFs, institutional adoption, well-funded crypto operations, and other things, billions of dollars are currently being used to buy and hold Bitcoin. In short, there is great demand.
There is also about to be a reduction in the current supply of Bitcoin through an event known as Halving Bitcoin. To explain briefly, Bitcoin is slightly inflationary, and new bitcoins are regularly added to the circulating supply. However, the new supply rate is halved approximately every four years, and the next halving of mining rewards will occur at the end of April.
Assuming demand for Bitcoin remains stable or grows, the price of Bitcoin may rise when new supply is halved. This sudden increase in price may trigger buying by crypto investors with FOMO, further exacerbating the rise.
The first day of summer is June 20, two months after the Bitcoin halving. Given past price appreciations following Bitcoin halving events, a 20% increase from $50,000 to $60,000 per bitcoin should be no problem.
The main warning here
The other question investors should ask themselves is whether Bitcoin investors have or will have an incentive to sell. And in fact, they could.
According to data from AltIndex, around 90% of all Bitcoin addresses had paper profits at the beginning of February; The percentage is even higher now and is the highest since the end of 2021. In other words, most people would make money if they sold their Bitcoin right now. In fact, that could motivate holders to sell. And if selling pressure matches or exceeds buyer demand, then the price of Bitcoin will not reach that $60,000 target.
On the other hand, most Bitcoin investors are probably aware of the more bullish arguments. So even though they have paper profits now, many are likely to continue holding on to them, anticipating bigger profits later.
In closing, I will say that my personal conviction is that Bitcoin will have another strong year in 2024. But that does not mean that it is an investment that should be taken lightly. In recent years, we have seen Bitcoin get hit by bad actors and wild swings in overall investor sentiment. So, nothing is guaranteed and it could be a wild ride.
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Jon Quast has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.
Bitcoin Breaks Above $50,000: Will It Break $60,000 Before Summer? was originally published by The Motley Fool
