With bitcoin hitting new all-time highs this year, many have begun to wonder if the possibility of a 100k bitcoin will become a reality. This debate is not new. This wager has continued to face commentary from all industries, with skeptics suggesting the asset is volatile and overvalued and supporters continuing to invest heavily in it. Even new investors have begun looking into what bitcoin is to avoid missing out on the profits others have experienced by investing.
Why Bitcoin Reaching 100k Is Possible
Bitcoin has seen a 300% increase in price over the year 2020, which is believed to be easily repeatable in 2021. That said, financial institutions like JPMorgan state that this move is likely but unsustainable. Here’s why.
Limited Supply Results In An Increased Price
In general, things are seen as valuable if they are rare or limited in supply. Bitcoin is no stranger to this concept and relies on the process of mining to issue new coins to the public for this very reason. The price of mining involves the validation of blocks of transactions. Computers that “mine” are tasked to validate a block of transactions and complete a complex mathematical puzzle. If a miner is able to solve the puzzle and validate their block, they are rewarded with a new bitcoin. To ensure coins can’t be created indefinitely, bitcoin has been set up to ensure the token reward for miners is cut in half every four years in an event called the halving.
The next halving is roughly estimated to occur in 2024 where the reward will be reduced to 3.125. Therefore, as we continue to approach this next halving, it is only expected that the price will go up in direct relation to the supply. While two halvings have occurred already, many technical analysts have suggested these events have still not been factored into the price. Instead, the third halving cycle is believed to follow the same path as the previous two and act as the start of another exponential growth phase. This cycle is believed to result in more than a 15-times return pushing the price of bitcoin well beyond the 100k mark.
Larger Business Investments
Businesses like Square, Paypal, and Pantera Investments have been trading heavily in bitcoin as a hedge against inflation. These investments have both driven demand from consumers who have taken this as a queue to invest and has also reduced the overall supply of the cryptocurrency. These announcements of major investments in cryptocurrencies and large enterprises accepting bitcoin are believed to continue fueling future price rallies. After all, we saw this to be true following the announcement of Tesla’s large investment into bitcoin and the coin reaching 52,000 USD shortly after. Elon Musk of Tesla has known to be an influential leader when it comes to technology, suggesting that other corporations may be quick to follow with his investments.
This leads many to ask, “if bitcoin is such a good investment, why haven’t these organizations invested until now?” The answer? The market wasn’t large enough for big-time investors until now. In fact, even if one bitcoin was priced at $300,000, the total market valuation would still be less than gold. Therefore, bitcoin is still believed to be in the early stages of the adoption curve, meaning entering the market now could pay off significantly. As bitcoin continues to grow, it is only a matter of time before the asset begins competing with gold in terms of size.
As a result, even conservative institutions such as family investment offices, portfolio managers, and pension funds are putting money into bitcoin. These institutions sit on the opposite end of the spectrum for day traders who trade on fluctuations. Rather, a conservative investor would look to bitcoin as a means to diversify their portfolio for their long-term holdings. Being among the largest groups of investors, these ones have begun investing in bitcoin regularly on either a daily, weekly, or monthly basis to increase their position in the cryptocurrency.
The Road To 100k
The road to bitcoin reaching 100k is likely to be far from a straight one. At each new all-time high, traders have chosen to take their profits, causing a short-term dip in the market. This cycle is likely to continue as bitcoin grows in value.
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