Over the first six months of 2024, you’ve probably heard all kinds of ultra-bullish predictions about where the price of Bitcoin (CRYPTO:BTC) could be directed next. International bank Standard Chartered, for example, now estimates that Bitcoin could reach $150,000 by the end of 2024.
This price target is aggressive, but it may not be aggressive enough. Billionaire venture capitalist Chamath Palihapitiya thinks Bitcoin could reach $500,000 by October 2025. According to Palihapitiya, two key catalysts could make this happen.
Bitcoin Halving
The main catalyst for rapid price appreciation is the reduce by half. Bitcoin recently experienced its fourth halving on April 19, and this event is currently expected to unlock considerable value over the next year.
With each halving, the reward paid to Bitcoin miners is reduced by half. This may not seem like a big deal (unless you’re a Bitcoin miner), but it has profound implications for the price of Bitcoin. First, the halving reinforces the scarcity of Bitcoin. Second, it also reinforces the anti-inflationary nature of Bitcoin, making it even more sought after as an inflation hedge.
It is the combination of these two factors that has led to truly stratospheric returns for Bitcoin during previous halving cycles. In May 2020, for example, Bitcoin rose from a price of around $8,800 to a (then) all-time high of $69,000 in November 2021.
To model the future price performance of Bitcoin, Palihapitiya analyzed the price performance of Bitcoin over different time intervals of the 2020 halving cycle. In the first three months, the price of Bitcoin increased “only » by a multiple of 1.37, as investors tried to understand what was happening to Bitcoin. But as the effects of the halving began to be felt, the price of Bitcoin soared by a multiple of 6.51x over 12 months and 7.8x over 18 months.
Using these numbers, Palihapitiya says it is possible to construct a potential timeline of how the price of Bitcoin could rise during the 2024 halving cycle. We can likely expect the price of Bitcoin to evolves largely laterally during a large part of the summer. This marks the first three months of the cycle. But the price of Bitcoin could start to rise as fall and winter approach. By next April, the price of Bitcoin could be on track to hit $500,000.
Of course, past performance does not guarantee future performance. Just because Bitcoin behaved a certain way four years ago doesn’t mean it will behave the same way today. To some extent, Palihapitiya recognizes this. Given the even larger price increases during the 2012 and 2016 halving cycles, Palihapitiya focused only on the 2020 halving cycle, in order to keep price estimates as conservative as possible.
Bitcoin as a reserve asset
The second key factor is Bitcoin’s growing opportunity to become a global reserve asset. According to Palihapitiya, non-Western countries are increasingly likely to become “dual currency.” This means that they will choose to hold both their national currency and Bitcoin.
You’re probably wondering: why would a country want to hold Bitcoin when they can hold US dollars? Well, consider the fate of the dollar. The United States is adding $1 trillion in new debt every 100 days, and its budget deficits are becoming worrisome. The more the United States goes into debt, the more it needs to print money and the less the dollar loses its value. Palihapitiya calls this the process of “dollar devaluation.”
In this context, it is possible to understand why certain non-Western countries no longer wish to hold dollars. Case in point: Saudi Arabia is rethinking its petrodollar deal with the United States. This arrangement, which has lasted for 50 years, is arguably one of the most important foundations of the modern global economy. This forces everyone in the world to buy dollars to buy oil, and it ensures a constant demand for U.S. debt.
If countries around the world start holding fewer dollars, it could open the door to Bitcoin. Add to this the fact that many institutional investors now view Bitcoin as a form of “digital gold,” and it’s easy to see the path for Bitcoin to become a reserve asset. At some point, Palihapitiya believes Bitcoin could completely replace gold.
How likely is this scenario?
While it is possible to poke holes in the thesis that Bitcoin halving leads to huge price gains, even skeptics have to admit that there is something fundamentally new this time around with the halving of 2024. This is the first time we’ve had a spot Bitcoin ETF, and it could make all the difference. Any selling pressure in the crypto market could be offset by new investor flows into ETFs.
As a result, I am still bullish on Bitcoin, despite its recent lackluster performance since the April halving. If things go as planned, crypto investors could have a lot to look forward to in 2025.
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Dominique Basulto has positions in Bitcoin. The Motley Fool posts and recommends Bitcoin. The Mad Motley has a disclosure policy.
Bitcoin Could Reach $500,000 By October 2025, According To This Billionaire Investor was originally published by The Motley Fool
