Bitcoin has a high historical probability of doubling from here

Bitcoin (BTC-USD) is at the point where a small retracement of previous highs can turn into a gigantic return. It closed last year at $ 47,686 per BTC token, but as of July 10, it is at $ 20,623.

So even if the BTC token rises to $ 41,246, or a doubling from here, it will still be down 13.5% so far this year (YTD). And if it were to rise back to where it was a month ago, it would be up 42.86%.

It’s just the simple math. But it also seems quite likely that this could happen. Let’s look at that.

Expected return for BTC

We can put together an array of expected probabilities and the related expected return (ER) scenarios for investing in Bitcoin. But just to simplify things, let’s take two scenarios and then average them. The first is a positive scenario and the second is a less than positive result.

For example, on the bright side, let’s say there is a good chance that Bitcoin can be doubled from here. And let’s just assume for simplicity that it takes a year to emerge. So let’s say there is a 60% chance that it will double, or rise 100%. That makes ER 60% (ie 0.6 x 100%).

However, let’s say in a not so positive scenario that there is an alternative 40% chance that the stock will rise 50%. This gives it an ER of 20% gain (ie 0.40 x 0.50).

Therefore, the combined ER for the two is a 100% probability of an 80% gain (ie 60% +20%). Investors can expect Bitcoin to rise to $ 37,121, or 80% above the July 10 price of $ 20,623.

The historical probability of Bitcoin doubling

The last time Bitcoin doubled, it only took 75 days, according to CoinTelegraph. But the fastest this ever happened was in 2021, when it took only 22 days. It rose from $ 21,000 to $ 42,000 in just three weeks and one day.

Does it sound familiar? Bitcoin is just under $ 21,000 now. In fact, it is already up 14% from the low of $ 18,084.

Here is another way to look at it. Let’s look at the recent history of Bitcoin.

The last time Bitcoin was at this price was at the end of December 2020. Since then, Bitcoin rose over 200% to over $ 63,000, and then fell over 50% to just over $ 30,000 in July 2021. It then continued to more than doubled to over 67 dollars, 00o in November 2021. Then it fell almost 40% to 36,000 dollars, jumped 30% to over 47,000 dollars in April 2022 and has since then fallen over 50% again to where it is today .

In other words, it has been three times Bitcoin has risen since the last time it was at today’s price level. It rose 200%, then 100%, then 30%. Therefore, the average gain was 110% when it rose.

Adjustment of expected return

This makes the probability that Bitcoin will rise 100%, or double from here, extremely likely. In fact, I would argue that the probability is much greater than 60% as in my positive scenario above. It’s more like 80% of a 110% gain, with only a 20% chance of rain – up only 50%.

This makes the total expected return equal to 98%. This can be seen by doing this calculation: (80% x 110% = 88%) + (50% x 20% = 10%). So 88% +10% = 98% (ie a double).

In other words, expect Bitcoin to double from here to $ 41,000 per BTC token. And if the story is any guidance, it probably won’t take nearly a year to take place.

At the date of publication, Mark Hake (neither directly nor indirectly) held any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the InvestorPlace.com Publishing Guidelines.