At the beginning of 2021, the world's largest cryptocurrency, Bitcoin (BTC 0.68%), exceeded the $50,000 mark per coin for the first time. After falling about 75% from its all-time high in the inflation-fueled crisis of 2022, the cryptocurrency had a lot of ground to make up. But on February 12, Bitcoin finally rose above $50,000 again.
The price of Bitcoin is rising at an incredible pace. As of this writing, the value is up more than 130% in the last year and more than 20% in the last month alone. At this rate, investors may be wondering whether Bitcoin can rise above $60,000 before the summer.
The answer is yes: Bitcoin can rise above $60,000 before summer. Here's why I think this.
Why Bitcoin can continue to rise
When it comes to the future price of Bitcoin, the key question is whether there will be a wave of buying demand from new and existing users. In other words, are there incentives to buy and hold Bitcoin now?
There are several reasons to believe that people and institutions are currently buying and holding Bitcoin. Here are a few to consider.
- The first 11 Bitcoin spot ETFs have just been approved and have started trading. Keep in mind that buying cryptocurrencies through an exchange or attempting to hold them yourself requires a learning curve, and easy-to-use Exchange Traded Funds (ETFs) get around this hurdle. These spot price ETFs could take off quickly because they allow people to invest in Bitcoin like they would invest in stocks, reducing complexity. According to data from CoinShares, inflows into these ETFs are increasing with weekly inflows of more than $1 billion.
- Another important point is institutional acceptance. Companies such as Microstrategy (MSTR -2.57%) Don't be afraid to be among Bitcoin's early adopters – the tech company held over 190,000 Bitcoins as of February 5th. But even institutions that were once against Bitcoin are now excited about the idea. For example, Blackrock CEO Larry Fink once said Bitcoin was an “index for money laundering,” but recently praised it, calling it “digital gold” in an interview with Fox Business.
- Similar to institutional adoption, there are many well-funded cryptocurrency companies that also hold Bitcoin. I point out that they are well capitalized because this means that they will not be pressured to sell their shares for liquidity reasons. For example, a Bitcoin mining company Marathon Digital (MARA -0.30%) has more than $300 million in cash, reducing the need to sell any of its nearly 16,000 bitcoins any time soon. Also stablecoin Connection generates interest income on the cash it holds in reserves. It also invests in Bitcoin with these earnings and now reportedly holds over 66,000 Bitcoins.
Between Bitcoin ETFs, institutional acceptance, well-funded crypto operations, and other things, billions of dollars are currently being spent on buying and owning Bitcoin. In short: the demand is great.
A reduction in the ongoing Bitcoin supply is also imminent through an event known as the Bitcoin halving. To explain briefly: Bitcoin is slightly inflationary because new Bitcoins are regularly added to the circulating supply. However, the rate of new supply is halved approximately every four years, and the next halving of mining rewards will occur around the end of April.
Assuming that demand for Bitcoin remains stable or grows, the price of Bitcoin may rise if the new supply is halved. This sudden price increase can then trigger purchases from investors with crypto FOMO, exacerbating the rise even further.
The first day of summer is June 20th – a full two months after the Bitcoin halving. Given past price increases following Bitcoin halving events, a 20% increase from $50,000 to $60,000 per Bitcoin shouldn't be a problem at all.
The biggest caveat here
The other question investors should ask is whether Bitcoin investors have or will have an incentive to sell. And they actually could.
According to data from AltIndex, around 90% of all Bitcoin addresses made paper profits in early February – the percentage is now even higher and the highest since the end of 2021. In other words: most people would make money by just selling their Bitcoin. This could actually motivate the owners to sell. And if selling pressure matches or exceeds buyer demand, Bitcoin price will fail to reach the $60,000 target.
On the other hand, most Bitcoin investors are probably aware of the more bullish arguments. Therefore, even if they make paper profits now, many are likely to continue trading and expect higher profits later.
Finally, I would like to say that I personally believe that Bitcoin is in for another strong year in 2024. However, that doesn't mean this is an investment that should be taken lightly. Over the past few years, we have seen Bitcoin hit by bad actors and wild swings in general investor sentiment. Therefore, there are no guarantees and it could be a wild ride.
Jon Quast has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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