Can bitcoin reach the magic limit of $ 100,000? Maybe so, but there are a few factors to take into account. David McNeal explained them, a summary below.
The bitcoin block halving will take place in May 2020
The rewards for mining new bitcoins are halved approximately every four years. This means that half the new bitcoins will be added. At the moment, miners earn an average of 1800 bitcoins per day. This will be reduced to 900 bitcoins in 2020. Because less bitcoin becomes available in the circulating supply, but the demand is likely to continue to grow unabated, the halving can serve as a price catalyst.
The next half in May 2020 will be the third half. The first halving took place in November 2012. After 4 years, the second halving took place in July 2016. Both halves were the start of more media attention for bitcoin, higher acceptance and a substantial price increase.
At bitcoin, the previous halves worked out well for the price. The opposite happened at litecoin last summer. The rate collapsed after halving because miners were selling their litecoin.
Supply and demand
It is also likely that speculators are already investing in bitcoin before the halving has even taken place, precisely to anticipate that halving. This can cause a peak in the demand for bitcoin in the run-up to the halving.
The price of each product is determined by demand and supply in the open market. Therefore keep up with the demand for bitcoin in all markets. That is very difficult, because there is also a lot going on outside the large and well-known exchanges. Consider over-the-counter and peer-to-peer sales. The increase in trade volume has a direct relationship with both demand and price increase.
Although the supply of available bitcoin will decrease, the demand will not. And if the demand increases in relation to the supply, the price rises.
Inflation plays a role
The value of bitcoin is also determined by inflation. The inflation rate of bitcoin is now lower than that of the US dollar and will even be lower than that of gold next year. In 2024, inflation will fall below 1% and this will gradually move towards zero, after which inflation will go inexorably towards zero. It is not surprising that the dollar price of bitcoin increases exponentially as the number of dollars in circulation increases exponentially.
Bitcoin is also called a safe haven for value. You can already see people in countries with a poor monetary policy storing value in bitcoins. In the past only gold had this function (and to a lesser extent silver) but it is good that a better alternative has been added. Traditionally, the price of a safe haven moves differently from the price movement of consumables.
Safe port assets have slow, gradual, downward price movements if things go well from an economic point of view. If the economy is not doing well, you will see massive, upward valuations.
Institutions are very enthusiastic about crypto
David McNeal writes that there is currently just over two billion dollars in crypto. A study by JPMorgan (US bank) found that for every new $ 1 billion pumped into cryptocurrency, the total market capitalization increases by $ 50 billion.
To the extent that this logic is true, this would mean that the actual amount of fiat invested in crypto in recent years is only 2% of what all cryptocurrency’s are worth. Currently the marketcap of all coins together is 200 billion dollars. That would mean that there are only 4 billion real dollars in crypto.
Suppose Bitcoin is worth $ 30,000 and reaches a market capitalization of $ 240 billion, then the market cap of the entire cryptomarket is $ 1 trillion. McNeal says that only 20 billion dollars is needed this year, because every 1 billion causes the entire market cap to increase by 50 billion.
He also thinks that BAKKT, Fidelity and ETFs can easily add 10 billion to this, increasing the value of the cryptomarket five times. Add small investors, bitcoin whales to this and we are at 20 billion dollars, or a marketcap of 1 trillion dollars.
McNeal calculates that if bitcoin wants to be worth $ 100,000, the market cap for bitcoin must be $ 2 trillion. This is about a quarter of the market capitalization of gold and 1/7 of the American money supply. Stock-to-flow models suggest that $ 100,000 can be reached before 2024.
He concludes that the halving alone provides a value of 10,000 dollars. $ 30,000 must be achievable by 2020. The following is actually out of the blue, but McNeal even dares to claim that bitcoin could be worth $ 200,000 in 2021.
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