The Internet is full of bitcoin (BTC) price predictions. For example, some analysts believe that the main cryptocurrency will reach $ 1 million per coin over the next 10 years, while others believe that the price of bitcoin will fall to zero over time.
Without delving into forecasts for five or more years ahead, let’s focus on what Bitcoin can do, for example, over the next six months?
Again, expectations vary greatly. Anthony Trenchev, founder of Nexo Finance, for example, believes that the price of bitcoin will reach $ 100,000 by mid-2022.
At the other end of the spectrum is University of Sussex professor Carol Alexander, who believes that the price of bitcoin could fall to $ 10,000, and regrets all the gains made in 2021.
Bitcoin was somewhere in the middle of these two very distant predictions, and at the time of writing, the cost of buying a BTC on Coinbase approached $ 36,500.
Weekly BTC / USD exchange rate chart. Source: Trading View
Bitcoin trading will increase by an average of 6.25 BTC per 10 minutes before the next halving in early 2024. This means that miners will produce around 900 BTC every day. As a result, by the end of June 2022, a total of 162,900 BTC will be generated per year.
This will increase the total number of bitcoins in circulation to approximately 19.078 million BTC. If BTC reaches $ 100,000 by then, its total market value will be close to $ 2 trillion, up 128.50% from this year’s first estimate of around $ 875 billion.
Conversely, a fall to $ 10,000 will cause bitcoin’s market value of total tokens in circulation to exceed $ 190 billion, a decrease of $ 685 billion or about 78% from earlier this year.
So the biggest question that arises after considering these amazing predictions is whether it is at all possible for Bitcoin to rush towards any of the goals above. In my opinion, the answer is yes, mainly because the BTC price has been very volatile in the past.
Bitcoin quarterly earnings. Source: Coinglass
One question to consider is whether investors are ready to put nearly $ 1 trillion into the bitcoin market over the next six months? Trenchev believes they could do it because of the “cheap money” factor.
Devaluation of a sovereign currency is still a catalyst
Investors will notice that the value of the US dollar has recently recovered.
A popular economic indicator called the US dollar index measures the strength of the dollar against a weighted basket of six foreign currencies: euro (EUR), Japanese yen (JPY), British pound (GBP), Canadian dollar (CAD), Swedish krona. (SEK), while the Swiss franc rose more than 7% to 96.22 last year.
Weekly price chart for the US dollar index. Source: Trading View
It is also worth noting that the value of the dollar has only risen against fiat currencies, and against commodities the dollar loses one battle after another.
For example, a recent report from the US Bureau of Labor Statistics shows that consumers paid 7% more for daily goods in December 2021 than they did 12 months ago. In other words, inflation in the world’s largest economy rose to levels not seen before 1982.
This shows that Dollar is nothing but the best weakest boxer in the ring, and competes with six of the weakest boxers. Sure, Dollar won rounds against all of them, but he also ran away from the real competition.
When we talk about competition, let’s compare the value with the rarest asset, which is gold.
Banknotes compared to gold since 1900. Source: VOMA.
The picture above also shows that almost all banknotes have lost their luster compared to gold. Inflation is the single most important factor in this room, in favor of investors who have hoarded the precious metal – or equivalent cash – against the current downtrend of currencies such as the dollar.
Around $ 40 trillion is currently circulating in the markets, including all physical money and money held in savings and current accounts. Meanwhile, investments, derivatives and cryptocurrencies amount to more than $ 1.3 quadrillion.
So yes, there are enough dollars in the market to pump another trillion dollars into the bitcoin market, so that the value of one unit will rise to $ 100,000 over the next six months.
Why has BTC not reached $ 100,000 yet?
Before discussing this argument, it would be wise to take a look at the evolution of Bitcoin’s market value over the years.