In early 2021, the world’s largest cryptocurrency, Bitcoin (CRYPTO: BTC), flew past $50,000 per coin for the first time. After falling about 75% from its all-time high in the inflation-powered crisis of 2022, the cryptocurrency had a lot of ground to make up. But on Feb. 12, Bitcoin finally surged past $50,000 once again.
The price of Bitcoin is rising at an incredible pace. As of this writing, it’s up more than 130% over the past year and up more than 20% in just the past month. At this rate, investors may fairly wonder if Bitcoin can surge past $60,000 before the summer.
The answer is “yes”: Bitcoin can surge past $60,000 before the summer. Here’s why I think so.
Why Bitcoin can keep rising
When it comes to the future price of Bitcoin, the key question to consider is whether there will be a wave of buying 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 a few to consider.
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The first 11 Bitcoin spot ETFs were just approved and began trading. Consider that there’s a learning curve to buying cryptocurrency through an exchange or attempting self-custody, and the easy-to-use exchange-traded funds (ETFs) go around that roadblock. These spot-price ETFs could enjoy rapid adoption because they allow people to invest in Bitcoin as they would invest in stocks, reducing complexity. According to data from CoinShares, inflows into these ETFs are picking up steam, with more than $1 billion in weekly inflows.
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Institutional adoption is another important point. Companies such as MicroStrategy (NASDAQ: MSTR) don’t fear being among the early adopters of Bitcoin — the tech company held over 190,000 bitcoins as of Feb. 5. But even institutions that used to be against Bitcoin are now warming to the idea. For example, Blackrock CEO Larry Fink once said that Bitcoin was an “index for money laundering” but more recently praised it, calling it “digital gold” in an interview with Fox Business.
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Similar to institutional adoption, there are many well-funded cryptocurrency companies that are also holding Bitcoin. I point out that they’re well-funded because this means they won’t be pressured to sell their holdings for liquidity reasons. For example, Bitcoin mining company Marathon Digital (NASDAQ: MARA) has over $300 million in cash, mitigating its need to sell off any of its nearly 16,000 bitcoins anytime soon. Also, stablecoin Tether generates interest income on the cash it holds in reserves. With this income, it also invests in Bitcoin and now reportedly holds over 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’s high demand.
There’s also about to be a reduction in the ongoing Bitcoin supply through an event known as the Bitcoin halving. To explain it briefly, Bitcoin is slightly inflationary, with new bitcoins regularly added to the circulating supply. However, the rate of new supply gets cut in half about every four years, and the next halving of mining rewards will take place around late April.
Assuming the demand for Bitcoin holds steady or grows, the price of Bitcoin can surge when the new supply gets cut in half. This sudden spike in price can then trigger buying from investors with crypto FOMO, exacerbating the spike even more.
The first day of summer is June 20 — a full two months after the Bitcoin halving. Given past price appreciations after Bitcoin halving events, rising 20% from $50,000 to $60,000 per bitcoin should be no problem whatsoever.
The major caveat here
The other question investors should ask is whether Bitcoin investors have or will have an incentive to sell. And indeed, they might.
According to data from AltIndex, around 90% of all Bitcoin addresses had paper profits at the start of February — the percentage is even higher now, and it’s the highest it’s been since late 2021. In other words, most people would make money if they sold their Bitcoin right now. That, indeed, could motivate holders to sell. And if selling pressure equals or surpasses demand from buyers, then the price of Bitcoin won’t hit that $60,000 target.
Then again, most Bitcoin investors are likely aware of the more bullish arguments. Therefore, even though they have paper profits now, many likely will keep holding, anticipating higher profits later.
In closing, I’ll say that my personal conviction is that Bitcoin is in for another strong year in 2024. But that doesn’t mean that this is an investment to take lightly. In past years, we’ve seen Bitcoin get hit by bad actors and wild swings in general investor sentiment. Therefore, 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 in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Bitcoin Surges Past $50,000: Will It Pass $60,000 Before the Summer? was originally published by The Motley Fool