The past year was characterized by monetary policy tightening as higher interest rates were put in place to combat rising inflation. As a result, investors flock to riskier assets, including growth stocks and cryptocurrencies. even Bitcoin (BTC -0.19%) 65% decrease in 2022.
But things may be turning positive, as Bitcoin jumped 37% in January. can do this Cryptocurrency Reach $100,000 per coin? Below $24,000 (as of February 1 afternoon), this price target implies a gain of over 300%. Here’s why I think it’s a real possibility.
The crypto winter is thawing
Since hitting 2022 lows in November, Bitcoin has rallied again. And this impressive performance mimics what we saw in the stock. The Nasdaq Composite IndexFor example, January rose 11%. And S&P 500 Having a strong start to the year, too.
Although it is generally a futile attempt to interpret short-term price movements in this way, I think a portion of the credit Inflation Trends In December, the Consumer Price Index rose 6.5% on an annualized basis, with growth continuing to decline with this data point. And the investors breathed a sigh of relief. In fact, the Federal Reserve announced a 25-basis-point hike at its latest meeting. An easing of monetary policy, or a less restrictive one, is a welcome sign for investors as it can boost economic growth and lead to higher portfolio values.
As the crypto winter thaws and asset prices likely rise, the fear of missing out builds. Investors new to the crypto space And Bitcoin in particular, provides more price support.
Bullish logic
Aside from Bitcoin’s near-term catalyst, which is cooling inflation and forcing the Federal Reserve to finally stop hiking rates, there is another compelling argument for why investors should own the top crypto. And it focuses on the big picture with an eye on the long term.
The most popular bull case for Bitcoin centers around it becoming a more prominent store of value. Naysayers will quickly point out that Bitcoin’s downward price in 2022 is a weak inflation hedge. But if we look at the past five years, Bitcoin is up 154% (as of this writing), compared to gold’s 43% gain. Bitcoin’s outperformance is evident the further back you look.
Why would anyone want to own Bitcoin though? It really comes down to the ballooning of the debt balance, especially in the third quarter of last year in the US, where the debt-to-GDP ratio was 120%, the highest it’s ever been. And although that ratio has declined since the start of the pandemic, a study conducted by The Wharton School at the University of Pennsylvania estimates that the debt-to-GDP ratio will reach 225% by 2050.
Even now, the US government is in a potentially dire situation, as it must once again raise the debt ceiling to avoid defaulting on its debt. So owning Bitcoin can be seen as insurance against financial disaster, as it will undoubtedly become an attractive place to park assets if things take a turn for the worse.
It’s easy to understand that as a widely accepted store-of-value asset, Bitcoin could easily rise to $100,000 and beyond. It really depends on investor attitudes and education about Bitcoin, as well as the evolving financial situation of governments around the world.
I wouldn’t bet on Bitcoin reaching $100,000 by 2023, as that is too short a time horizon to make any accurate predictions for it. If I could bet on hitting the six-figure mark in the next five years, however, I’d take it in a heartbeat. It just got to a point that made it hard to ignore. and makes it extremely easy for financial services providers to gain exposure to the emerging ecosystem.
As a result, I think investors would be wise to put 1% of their net worth into Bitcoin. It will definitely be a bumpy ride, but the upside is huge.