After an impressive 2023, when it rose more than 150%, Bitcoin (BTC -0.29%) An even better year 2024 is on the horizon. But will it manage to maintain enough momentum to reach the highly anticipated $100,000 mark?
Let's get to the point: the answer is yes. The reason for this can be attributed to several evolving developments, but the most influential can be traced to a simple phenomenon: supply and demand. With a little math, it's easy to see that a six-figure Bitcoin value is not only possible, but almost certain.
Image source: Getty Images.
Half half half half
Even if you can't physically hold a Bitcoin, its price, like any other asset, depends on supply and demand. The difference with cryptocurrency is that we not only know with certainty that it will become scarcer over time, but also exactly when and by how much.
The foundation of its robust monetary model is an event hardwired into its code called the halving. After 210,000 blocks are added to the blockchain – roughly every four years – the cryptocurrency’s inflation rate halves. This process will take place until 2140, when the last Bitcoin will be mined.
The next halving is scheduled for April this year. Then Bitcoin’s inflation rate will drop from around 1.75% to just 0.85%. As a result, from this halving to the next one, only 656,250 Bitcoins will enter the market, exactly half of the 1,312,500 that entered the market since the previous halving.
The effects of the halving are relatively simple. When supply decreases, the price of Bitcoin can skyrocket even if demand remains constant.
In the years in which a halving occurred, the price of Bitcoin increased by around 125% on average. If a similar situation occurs this time, a 125% increase from its price at the start of the year would put Bitcoin just below the six-figure mark of $99,000.
How Bitcoin makes it to $100,000
Assuming this halving goes like the previous ones, we should get very close to the coveted price of $100,000. However, we have to consider another variable: the existing Bitcoin supply.
While there are technically around 19.6 million Bitcoins in circulation today, only 2.3 million are available for purchase on exchanges. This is the lowest value since the beginning of 2018. More importantly, such low values mean that at the upcoming halving, for the first time in Bitcoin's history, there will be fewer coins in the market than at the previous halving.
Throughout Bitcoin's history, the overall supply on exchanges has grown, even as halvings have passed. But that changed in 2020, when an apparent decline became apparent. The explanation for this is varied, but the most succinct is that demand has finally started to outstrip supply.
Now the historically low supply of digital coins will come under even more pressure as a halving is on the horizon. While the halving holds the potential to push the price to nearly $100,000, the additional impact of a supply shortage will likely prove to be the additional fuel needed to reach six figures.
A necessary disclaimer
The majority of these analyzes use historical data to predict performance. It should go without saying that historical patterns are not a certainty about future returns. For all we know, this halving could be the anomaly that breaks the trend.
While it is unclear what the exact outcome will be, it is difficult to ignore the impact of the halving and the resulting amplifying effect on an already tight supply. The relationship between supply and demand is as crucial to the value of an asset as gravity is to the solar system. It forms the basis of all patterns and behaviors.
Any change in the supply of an asset adds upward pressure on its price as long as demand remains constant, and by almost all reports, it doesn't look like demand for Bitcoin is going anywhere.
Admittedly, hitting $100,000 in 2024 may be a bit of a stretch, but it is certainly possible. If Bitcoin doesn't reach six figures this year, it will only buy investors more time to accumulate it as it heads toward the highly anticipated $100,000 mark.
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.