How Realistic Is a Bitcoin Price Target of $100,000?

There has been a lot of it Bitcoin (BTC -0.56%) abundance lately, with Bitcoin up more than 15% in the past week, and nearly 70% for the year. Bitcoin is now trading at nearly $28,000, accounting for a staggering 46% of the total market capitalization of the $1.2 trillion crypto market. Everyone, it seems, wants a piece of Bitcoin these days.

Perhaps unsurprisingly, given all this bullishness, some tech insiders are now predicting that Bitcoin could reach $100,000 soon, perhaps within the next 12 months. It includes apple co-founder Steve Wozniak, who recently suggested a price of $100,000 was possible. But how realistic is this price target? After all, Bitcoin’s all-time high is $68,789.63, and that was at the peak of the tech bull market. Here’s a closer look at several factors to keep in mind if you expect Bitcoin to rise towards the end of the year.

Interest

Until recently, the primary factor influencing the future price of Bitcoin was the Federal Reserve and the path of US interest rates. Therefore, for Bitcoin to continue its extraordinary rise, it looks like it’s going to need some help from the Fed. If the Fed pauses its rate hikes, or even decides to cut interest rates, it will be very bullish for Bitcoin.

Given the current state of the banking sector, which has been hit by rising interest rates, this may indeed happen. That’s probably why forecasts of $100,000 Bitcoin are starting to appear. Lower interest rates are typically favorable for risk assets such as crypto. But lower interest rates are no guarantee.

Bitcoin as Digital Gold (The Sequel)

Remember when everyone thought Bitcoin was “digital gold” and a safe haven against inflation? That was the general mindset among crypto investors until the 2022 market meltdown. Well, it looks like that argument is coming back, in a slightly different form. It’s hard to ignore the growing number of analysts calling Bitcoin a potential safe haven in the face of a financial storm. Some people actually say they’d rather hold Bitcoin than put their money in risky banks.

Image source: Getty Images.

So if Bitcoin replaces gold as the safe haven of choice, then that would be bullish for Bitcoin. Keep an eye on what the big institutional investors are doing with their portfolio allocations. If more and more of them increase their exposure to Bitcoin, that will also be a big plus. Some even suggest that companies may start holding Bitcoin directly on their balance sheets.

Technical stocks

Until the recent banking crisis, the crypto asset class was highly correlated with the performance of technology stocks. In other words, if major Silicon Valley stocks went up, so did crypto. If major Silicon Valley stocks went down, crypto went down.

So I think this is where the $100,000 goal starts to break down. Have you checked the news recently from the likes of Meta platforms, which just laid off another 10,000 employees? Or Amazon, which yesterday said it was cutting another 9,000 jobs. A number of major tech companies have also announced large rounds of layoffs, so I don’t see a rebound in tech stocks anytime soon. Add in the fact that Silicon Valley Bank was the top lender for small tech startups, and things don’t get any more encouraging.

Bitcoin’s Long March to $100,000?

I think Bitcoin will eventually break through the $100,000 mark. But it may take longer than many now expect. I base my analysis on long-term secular trends occurring in the financial markets, such as Bitcoin’s increasing use as a form of payment, and Bitcoin’s increasing allocation in the portfolios of institutional investors.

Investors should be deeply skeptical of any argument that basically boils down to “Fiat money system has failed, now everything is ready for crypto.” This argument is not only naive, but it also puts crypto investors in a difficult position. Who wants to root for bank crashes and bank runs?

Remember that it is difficult to predict the future of the economy. As legendary economist John Kenneth Galbraith once said, “The only function of economic forecasting is to make astrology look respectable.” Nobody really knows what’s going to happen to Bitcoin this year because nobody really knows what’s going to happen to the economy. I am optimistic about Bitcoin in the long term, but I also recognize that the path to $100,000 may be more difficult and challenging than many crypto bulls are now willing to acknowledge.