Can Bitcoin increase its value by another $1 trillion?

Janak9955

If I told you that Bitcoin is just getting started and its market value could increase by another $1 trillion by the end of 2025, you might have plenty of reasons to roll your eyes or politely smile. But the upcoming event—the much-anticipated Bitcoin halving—many Wall Street analysts believe it could potentially double the value of Bitcoin and add another $1 trillion to its market cap over the next 12 months. Are they right?

The first thing you need to know is that the Bitcoin halving will take place around April 19, and you might not even notice it happening. You won't see millions of people gathering in specific locations to cheer for this event, like we recently witnessed in a total solar eclipse. And you won't see Satoshi Nakamoto—the pseudonymous creator of Bitcoin—appearing on late-night television. At best, you'll see mentions of #Bitcoin on social media.

That's because everything happens through algorithms, not in the real world. Approximately every four years, the Bitcoin algorithm adjusts, halving the mining rewards for Bitcoin miners. Currently, they receive 6.25 BTC for every block they add to the Bitcoin blockchain; around April 19, they'll receive 3.125 BTC.

However, another way to think about it is that the rate at which new Bitcoins are created is halving. This has significant economic consequences. It enhances Bitcoin's scarcity, making it more attractive as a long-term investment. According to the algorithm, the total maximum supply of Bitcoin throughout its lifetime is capped at 21 million. The current circulating supply is already 19.7 million Bitcoins, meaning 94% of Bitcoins have already been created!

That's why many analysts believe that with everyone scrambling to get available Bitcoins, a very real "supply squeeze" or "supply shock" could occur. There have already been reports of Bitcoin supply on cryptocurrency exchanges beginning to dry up, so this "supply tightening" could become very severe immediately after the halving. When you factor in all the new demand from the proposed Bitcoin ETFs, it's easy to see how Bitcoin's price could skyrocket.

If you look at previous Bitcoin halving cycles, it's easy to come to the conclusion that the scarcity effect is very real. Bitcoin has already gone through three halving cycles—2012, 2016, and 2020—each resulting in a significant price increase and hitting historic highs.

Take the 2012 halving, for example. The price of Bitcoin soared from $12 to $1,161, a staggering increase of 9,575%. After the 2016 halving, Bitcoin's price surged from $600 to $20,000, a rise of 3,233%. And after the 2020 halving, Bitcoin's price surged from $9,000 to $69,000, a 667% increase.

So we're not just talking about a 10% increase here. We're talking about unprecedented parabolic movements in the history of financial assets. Hence, it's not surprising that hedge fund managers and cryptocurrency analysts are steadily increasing their price expectations for Bitcoin post the 2024 halving cycle. The current consensus seems to be that by the end of 2025, Bitcoin's price will reach $150,000, meaning Bitcoin's price will more than double, and its new market cap will exceed $1 trillion.

So far, so good, right? The basic economic logic of halving makes sense, and we have plenty of previous price data to support the conclusion. But not so fast. Remember, it took Bitcoin almost a full decade to achieve a $1 trillion market cap. Now we're saying Bitcoin will replicate a full decade's worth of work in just 12 months?

Furthermore, take a close look at the returns post each halving cycle. They're decreasing over time. So, the returns post the fourth halving cycle might not be as impressive. If you look at the post-halving returns within just a six-month timeframe, as Coinbase Global recently did, those numbers become even less impressive. In the 2020 halving cycle, Bitcoin only rose by 82% after the first six months.

Finally, remember that as Bitcoin becomes mainstream, it's also more likely to start behaving more like mainstream financial assets. It might start losing some of its volatility, thus losing some of the entirely unprecedented upside potential. So, this time, keep your expectations in check. The time for Bitcoin to become a $2 trillion asset might be longer than people imagine.

Jafar224

For this, it's also uncertain.

Ritu77

Is it too simple to increase in value again?

Samiksha

Only capital knows this.