Bitcoin: Forecasts and Potentials – A Firework Display on the Horizon?

The allure of cryptocurrencies, particularly Bitcoin, often lies in the prospect of rapid and impressive price gains. An impressive example of this is the 164 percent increase in Bitcoin's price within six months from October 2023 to April 2024. Although the Bitcoin price has since moved more sideways, some analysts predict another significant price increase. Analysts from Bernstein have prophesied in a recently released report that Bitcoin could reach a price of $200,000 by the end of 2025—a "conservative" estimate according to their own account. This would represent an increase of about 180 percent compared to the current price. The remarkable price gains in the previous year are primarily attributed to the introduction of spot Bitcoin ETFs, following the approval of eleven of these funds by the U.S. Securities and Exchange Commission in January. These ETFs significantly facilitate investor access to Bitcoin as they can be purchased through regular brokerage accounts. So far, over 20 billion dollars have flowed into Bitcoin ETFs, mainly from private investors. However, Bernstein expects an increased entry of institutional investors who are developing strategies to deal with Bitcoin's liquidity and volatility risks. Clearer regulatory guidelines could strengthen institutional players' confidence and lead them to increase their involvement with the cryptocurrency. With the increasing investment activity of these institutions, the demand for Bitcoin is likely to rise, causing prices to further increase. Analysts from Ark Invest, led by Cathie Wood, estimate that a global portfolio reallocation of just one percent towards Bitcoin could drive the price to $120,000. Combined, Bernstein expects that the assets of Bitcoin ETFs will rise from around $60 billion to $190 billion by the end of 2025. Another factor that could boost the Bitcoin price is the recent Bitcoin halving, where the rewards for mining new coins are halved. Historically, Bitcoin prices rise after each halving, even though the expected price rally this year is yet to materialize.