Source: PaxForex Premium Analytics Portal, Fundamental Insight
Despite the recent lull in early 2022, when the cryptocurrency market lost about 20% of its value, the entire asset class has been an excellent investment in recent years. While the S&P 500 has delivered total returns close to 100% over the past five years, cryptocurrencies have grown from a total market value of $24.5 billion in March 2017 to $1.8 trillion today.
The major cryptocurrency, bitcoin, has unsurprisingly attracted a lot of attention as digital assets move toward universal acceptance. And as it becomes a daily topic of discussion in the financial news, there is no shortage of price points.
Can bitcoin, currently hovering around $40,000 per coin, reach the $100,000 mark? Let's try to figure it out.
With its ability to support decentralized applications, Ethereum is rightfully attracting attention because it offers real-world examples of cryptocurrency use cases. Bitcoin, on the other hand, has firmly established itself as a store of value in the world of digital assets. Created in 2009, it has the longest history. And it has a market value of $788 billion (as of this writing).
This longevity has led to the development of a financial infrastructure that has made it extremely easy to buy bitcoin. There are exchange-traded funds to buy the world's main cryptocurrency. In addition, companies such as Block, PayPal Holdings, and Coinbase Global have made buying bitcoin incredibly easy.
According to a study by crypto.com, there will be 300 million cryptocurrency users worldwide by the end of 2021. And by the end of this year, that number could reach 1 billion. Since most people first encounter cryptocurrencies by buying bitcoin or ether, the potential for mass purchases exists as new investors come into the crypto economy.
And it's not hard to imagine a scenario in which more and more countries follow in El Salvador's footsteps and introduce bitcoin as legal tender. In addition, large organizations, including governments, institutional investors, and corporations, may decide to move some of their cash into bitcoin. Combined, these trends could easily push bitcoin above $100,000.
Notorious investor Cathy Wood and her company Ark Invest, which is known for its incredible predictions, believes that bitcoin could reach the $1 million per coin mark by 2030. This prediction by her company depends on a host of factors, such as the increasing number of countries accepting bitcoin as legal tender, the growth of institutional and corporate ownership, and an increasing share of the global remittance market. In our opinion, this is the most optimistic scenario, so investors should temper their anticipations to get a more precise picture.
Most people are positive about the whole crypto-economy, so the decision to allocate a small portion (1% to 2%) of a well-diversified portfolio to bitcoin seems far from idle. Cryptocurrencies have gone through many "crypto winters" in recent years, but then came back stronger. And some of the best and brightest minds are leaving lucrative jobs in traditional technology and finance to work in cryptocurrency startups. These factors make us confident that cryptocurrencies will only become more a part of our lives in the coming years.
Perhaps the biggest argument from the bears is the threat of governments banning cryptocurrencies (as China did last year). But in the US, Federal Reserve Chairman Jerome Powell and Securities and Exchange Commission (SEC) Chairman Gary Gensler have publicly stated that they have no intention of making cryptocurrencies illegal. This bodes well for supporters of digital assets.
So it's hard to imagine a future in which bitcoin doesn't rise in price. Of course, it won't be a smooth path, and investors can anticipate massive volatility along the way. But with the continued proliferation of necessary financial infrastructure, as well as much-needed regulatory clarity, the likelihood of bitcoin reaching the $100,000 mark is likely.
At that price, bitcoin's total market value would approach $2 trillion. According to the consulting firm McKinsey, the world's wealth today is about $500 trillion. It's no surprise that Bitcoin accounts for half a percent of that figure.
If a time frame had to be defined, one could say that it could happen within five years, which would provide an annual return of about 20 percent. Compared to bitcoin's five-year yield of 3,000%, this is a significant slowdown. Nevertheless, the potential to outperform the stock market is very high.
As long as price is above 41000.00, follow the recommendations below:
Time frame: D1
- Recommendation: long position
- Entry point: 41723.00
- Take Profit 1: 45900.00
- Take profit 2: 52000.00
Alternative scenario:
If the 41000.00 level is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 41000.00
- Take Profit 1: 35000.00
- Take Profit 2: 29000.00
