Three fundamental drivers of Bitcoin’s potentially bright future
Bitcoin (BTC) is trading back above the $23,000 mark, but the flagship digital asset remains far from its all-time high of $67,000 reached in November 2021.
Nevertheless, the maiden cryptocurrency could have a bright future if three fundamental forces—inflation, halving, and adoption—continue to exert their strong influence.
Inflation and Bitcoin’s Deflationary Nature
According to some financial experts, including Bloomberg senior commodity strategist Mike McGlone, Bitcoin could emerge as one of the biggest beneficiaries of the deflationary circumstances that could unfold in the second half of the year.
Elsewhere, an Austrian economist and author of “The Bitcoin Standard” Addressing the rampant inflation affecting economies around the world in May, Saifedean Ammous opined that “Bitcoin fixes this,” among other issues.
As for inflation of the decentralized finance (DeFi) asset itself, a chart by Bitcoin lawyer and software engineer Jameson Lopp shows that Bitcoin’s annual inflation rate is continually declining in line with the dwindling amount of tokens left to mine.
According to these estimates, the inflation rate by December 2030 will be around 0.39%.
Historical bullishness after halving
Throughout its history, Bitcoin has undergone several halving events that were followed by significant price increases.
After the first halving in November 2012, the price went from $12 to $1,200 in a year. The second event in July 2016 increased from $647 to $19,800 or 2960% by December. One year after the last halving event in May 2020, Bitcoin climbed from $8,700 to $49,000 on May 11, 2021, which was a 463% increase.
Considering the recent halving record, Bitcoin’s price has risen increasingly in line with the behavior of the 2016 halving. Considering the average price increase between the first two halving events and the price during the 2020 halving, Bitcoin is likely to trade at $284,272 by the next halving event predicted for 2024.
In addition to the next one, Bitcoin is set to go through one more halving event by 2030.
Institutional adoption
Finally, the interest of large organizations in cryptocurrencies is putting a lot of pressure on the price of the flagship digital asset, as institutional adoption gives crypto more legitimacy.
One of the latest examples is global investment management company BlackRock (NYSE: BLK ) which recently partnered with Coinbase to connect its institutional clients who own assets on the crypto exchange with its asset manager suite of tools.
Other examples of institutional use of crypto include banking giant Goldman Sachs (NYSE: GS ) which announced in April that its private wealth management division would begin offering its first investment vehicles for Bitcoin, as Finbold reported.
Disclaimer: The content of this page should not be considered investment advice. Investment is speculative. When you invest, your capital is at risk.
