Launched almost 15 years ago, Bitcoin (BTC-USD) remains the top cryptocurrency on the minds of most investors. The top crypto’s recent price movements have garnered the attention of many investors, with Bitcoin recently surging above $52,000 per token for the first time in more than two years. Accordingly, given its momentum, many bullish price targets are now being set on this key digital asset.
Bitcoin’s impressive surge last year of more than 150% has some investors suggesting another double-up from current levels. Of course, valuation is difficult in the digital asset space. And while supply remains constrained, and will be constrained further via the token’s upcoming halving event (more on that later), demand for Bitcoin remains the key question. If investors stop pushing capital into this digital asset, it’s possible 2022-like declines could be in order.
With that said, let’s dive into the bullish argument behind what could drive Bitcoin to $100,000 in less than two years.
Bitcoin Is Improving In Terms of Investor Legitimacy
In order for Bitcoin to cross through the pivotal six-figure realm, a number of catalysts will need to prevail. Among the key catalyst many bulls point to is continuing institutional investment into the digital asset space, and by default, the leading cryptocurrency in the world.
The Securities and Exchange Commission’s recent decision to approve spot Bitcoin ETFs provides the sort of legitimacy many investors have been hoping for. And while Bitcoin’s price action disappointed many investors immediately following the ruling, it’s clear that market sentiment is staring to shift.
Trillions of dollars in institutional capital may be looking for high-beta ways to play a broader market rally. And given the outsized returns Bitcoin has historically provided, it’s clear that demand for Bitcoin may be boosted by these spot ETFs over time.
The Impact of Spot Bitcoin ETFs
On that note, many investors have noticed the initial influx of capital into Bitcoin following the SEC’s approval of these ETFs. The top spot ETFs in the market immediately witnessed $10 billion in inflows in short order. And even if a conservative percentage of institutional capital continues to plow into Bitcoin, this token’s demand could simply overwhelm existing supply, given that only a fraction of existing Bitcoin is traded (much of it is held in cold storage).
Portfolio allocation questions remain, and there’s always the potential for institutional investors to choose other digital assets over Bitcoin. However, with no other spot ETFs available, I do think Bitcoin holds the pole position in this regard.
The approval of spot bitcoin ETFs marked a pivotal moment for the $1.7 trillion digital asset sector, attracting institutional investors and boosting bitcoin demand. Analysts expect substantial inflows over time, with $14.4 billion projected in the first year, $27 billion in the second, and $39 billion in the third.
Thus, for those with a 2025 time horizon, such demand could stoke continued buying pressure providing a floor underneath Bitcoin prices, and allowing any bullish sentiment to drive this token’s price higher.
Good Hedge for Inflation
Cryptocurrencies, including Bitcoin, undergo inflation due to mining, akin to gold. Bitcoin’s halving mechanism reduces inflation over time. As Bitcoin appreciates against fiat currencies, its inflation rates are less problematic. However, stablecoins pegged to fiat, may depreciate with their reserved currency.
Bitcoin, designed to mirror gold’s stable inflation rate, technically experiences inflation. While often considered deflationary due to rising purchasing power, deflation refers to decreased money supply. Bitcoin’s fixed supply prevents deflation.
Although Bitcoin is touted as an inflation hedge, recent trends show it’s less effective due to market interdependence. Institutional involvement correlates Bitcoin’s performance with broader market movements. Inflation news triggers Federal Reserve actions, affecting Bitcoin prices.
That said, is Bitcoin a reliable hedge against inflation? While gold has been the traditional choice, cryptocurrencies like Bitcoin offer strong alternatives. Rather than entirely inflation-proof, Bitcoin is more accurately termed as inflation-resistant. With its fixed supply, Bitcoin is considered a robust hedge against inflation, potentially even superior to gold due to its long-term growth prospects.
Now’s the Time to Consider Adding Bitcoin Exposure
Bitcoin’s historical performance makes it an enticing investment, especially with recent developments like the introduction of spot bitcoin ETFs, simplifying access for investors. Many view Bitcoin as a diversification tool akin to gold. Despite its appeal, the cryptocurrency market carries significant risks due to its difficult-to-value nature and uncertainty about its long-term viability and value. That said, I do think Bitcoin represents an intriguing risk-on bet for long-term investors at current prices.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
