Bitcoin (BTC +0.75%) has come a long way since the depths of the crypto winter of 2022. In the last two years, it has climbed more than 300% and recently notched a new all-time high.
Yet, since hitting that peak in April, things have cooled off and -- dare I say -- become lackluster. Volatility has returned, and any momentum that Bitcoin tries to muster seems to be short-lived. However, while the current situation might look a little bleak at the moment, I view a sub-$70,000 Bitcoin as an opportunity that won't last long.
Here's why.
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Why now might be a good time to buy
In the short term, there are two events that will likely prove to be significant factors that eventually push Bitcoin's price well past $70,000.
The first is Bitcoin's halving. Occurring approximately every four years, the halving reduces the rate at which new Bitcoins are produced, thus increasing scarcity. In other words, halvings alter the dynamics around Bitcoin's supply and demand.
By reducing the supply rate at which Bitcoins are produced, the halving essentially makes it so that even if demand remains constant, the price has to increase in order to compensate for the reduction in supply. After all, the mining operators still need to pay their electric bills. On average, in the year a halving occurs, Bitcoin's price increases by about 125%. Should a similar situation unfold this time around, Bitcoin could potentially reach nearly $100,000 by the end of the year.
The other short-term development that should give Bitcoin a boost is the approval of spot Bitcoin exchange-traded funds (ETFs). With these ETFs, investors can gain Bitcoin exposure through brokerages and no longer have to navigate what can be complex cryptocurrency exchanges, effectively democratizing access to Bitcoin for both retail and institutional investors.
The demand for these Bitcoin ETFs has been extraordinary, with initial purchases occurring at 10 times the daily production rate of Bitcoin. Although the frenzy has slightly cooled, these ETFs remain among the most successful launches in history, amassing $15 billion in capital inflows within just six months. To provide some context, Bitcoin ETFs achieved the same inflow volume in seven weeks that took gold ETFs three years to accomplish.
CRYPTO: BTC
Key Data Points
Long-term prospects
While there are short-term developments that are encouraging and should make the dip below $70,000 only temporary, it is over the long term that Bitcoin's appeal becomes most apparent. First and foremost is its robust monetary policy that prioritizes not just value preservation, but appreciation, thanks to the halvings and its finite supply of 21 million coins. As fiat currencies around the world continue to inflate and governments take on greater amounts of debt, Bitcoin will come to solidify itself as the ultimate safe haven asset.
Furthermore, Bitcoin's decentralized nature ensures that no single entity controls the network, making it resistant to censorship. This quality will prove increasingly valuable in a world where financial systems are subject to regulatory pressures and geopolitical tensions.
Last but not least is the overarching trend of younger generations coming of investing age. These younger generations are known to be more comfortable with digital assets and, as the premier crypto, Bitcoin should naturally benefit.
Potential for price appreciation
Over the long term, it's easy to see a scenario where Bitcoin doesn't keep up its historic pace of price appreciation. That shift is likely many years ahead, though. As sensational as it might sound, a $1 million price tag for Bitcoin is within the realm of possibility. Several models and theories, such as the Power Law and Metcalfe's Law, support this potential.
If Bitcoin hits $1 million or even half of that, then a sub-$70,000 purchase becomes all the more compelling. But rest assured, while only time will tell just how high Bitcoin climbs, it's likely that investors will eventually look back at today's prices similar to how they view the days when Bitcoin traded for less than $10,000 -- with a sense of missed opportunity.
