Can Bitcoin Reach $100,000? | The motley fool

While inflation continues to rage, the Federal Reserve must continue to push up interest rates in the US – and this has pressured risky financial assets, a category such as cryptocurrencies, among others. Bitcoin (BTC -6.37%)belongs well. Investors are not as comfortable owning speculative assets as they were just 12 months ago.

Bitcoin’s price is down about 75% since it hit an all-time high of nearly $69,000 about a year ago. But even with the significant price drop, I think so the world’s best cryptocurrency may one day eclipse $100,000 per coin. Here’s why.

Bitcoin as a store of value

Bitcoin was launched in early 2009 solely as a way for two parties to digitally send money to each other without a central intermediary. This was not possible before, so the innovation of Bitcoin was truly something special. Today, the network has a market value of $320 billion, more than double that Ethereum. the second most valuable crypto.

Despite its intended purpose as a payment mechanism, Bitcoin up to this point has really only been used as an investment vehicle. Some even call it a digital version of gold, a place to store some of your savings to diversify the rest of your portfolio. Bitcoin is likely many people’s first exposure to the crypto asset class, so as more people become familiar with it, a higher price should follow. Plus large companies and asset managers, such as Micro strategy and Cathie Wood’s Ark Invest, are bullish on Bitcoin and own some.

If Bitcoin only represented 16% of the total value of gold on Earth, roughly $12.5 trillion, the price per coin would come to $100,000. I don’t think it’s too much of a stretch. Younger people increasingly prefer Bitcoin over gold, a trend that should continue in the future. And this makes sense, given that younger people are more tech-savvy and digitally savvy. Also, as the internet continues to grow in importance, looking for ways to store value digitally should become more popular.

In addition, it is worth looking at the government debt market to support why Bitcoin’s price should rise. As of February, approximately $7.7 trillion worth of bonds were outstanding with a negative real yield. Think about this for a moment. Investors were actually paying borrowers to take their money, a scary phenomenon spurred by ultra-loose monetary policy for most of the past decade. Higher interest rates have solved this somewhat in 2022. But when the Fed changes its rate hike plan, after it has tamed rising inflation, and again adopts an accommodative monetary stance, the negative yielding debt situation will most likely continue like interest rates. loose.

What if some of this money that is in negative and low yield bonds found its way into Bitcoin? This will surely increase the price over time.

Bitcoin’s path to $100,000, which would represent a roughly six-fold gain from today’s price, is certainly going to be fraught with volatility. In fact, over the past decade, Bitcoin has experienced multiple declines of more than 50%. So, if investors want to own this asset, they need to take a long-term view, and mentally prepare for the inevitable ups and downs and continue to persevere through them.