The first cryptocurrency to buy before it rises from 700% to 2,900%, according to some Wall Street analysts

The price of Bitcoin (CRYPTO: BTC) is based on supply and demand. However, since the supply will never exceed 21 million coins, cryptocurrency demand is the only relevant variable. This means that Bitcoin’s future price trajectory depends entirely on whether demand increases or decreases from the current level.

With this in mind, some Wall Street analysts believe two catalysts will increase demand for Bitcoin in the future, to the point that the cryptocurrency could rise 700% or more from its current price of around $50,000 by the end of the decade. Here’s what investors should know.

Recent developments strengthen the investment thesis for Bitcoin

A report from Fidelity recently identified several signs of growing demand for Bitcoin. Monthly active addresses, monthly new addresses, and monthly transactions are all trending upward. Bitcoin’s illiquid supply (i.e., the percentage that hasn’t moved in more than a year) is near a record high and trending higher, meaning more investors are holding the supply cryptocurrency. And the number of accounts with at least 0.1 Bitcoin reached a record high in December 2023.

Beyond these trends, two catalysts could create greater demand for Bitcoin in the future. First, the Securities and Exchange Commission recently approved several spot Bitcoin exchange-traded funds (ETFs). These investment vehicles provide direct exposure to cryptocurrency without the hassle of buying and holding Bitcoin. By reducing friction, spot Bitcoin ETFs could attract more retail and institutional investors into the market. In fact, collective inflows into spot Bitcoin ETFs during the first month of trading were higher than inflows from any other ETF launch in history.

Second, Bitcoin mining rewards are reduced by 50% every time 210,000 blocks are added to the blockchain, which happens about once every four years. The next halving is scheduled for April and will effectively increase demand by reducing selling pressure. To elaborate, miners sell Bitcoin to monetize their operations, but will have 50% less Bitcoin to sell after the April halving event.

There is historical precedent for Bitcoin to increase in value after mining rewards are halved, as shown in the table below.

Halving event

Bitcoin Return (2 Years Later)

Data source: Fidelity Digital Assets.

Several financial professionals have issued bullish price targets for Bitcoin

Anthony Scaramucci, founder and managing partner of Skybridge Capital, recently told podcast host Scott Melker that Bitcoin could reach $240,000 within 18 months of the April halving event. Scaramucci also said that Bitcoin will eventually reach half the market capitalization of gold, bringing its value per coin to around $400,000. This implies a 700% upside from the current price of $50,000.

The story continues

Tom Lee, managing partner and head of research at Fundstrat Global Advisors, recently told CNBC that Bitcoin could reach $500,000 in the next five years, implying a 900% upside from its current price. “There is limited supply and now we have a potentially huge increase in demand with spot Bitcoin [ETF] approval, so I think in five years something around half a million would potentially be achievable,” Lee said in January.

Cathie Wood, founder and CEO of Ark Invest, recently discussed her Bitcoin valuation model with CNBC. Its underlying valuation is around $600,000 by 2030, implying an upside of 1,100% from the current price. But its bullish valuation is $1.5 million by 2030, implying a 2,900% upside from its current price. Wood said the spot approval of the Bitcoin ETF makes the bull case more likely.

Investors should understand the risks before purchasing Bitcoin

Bitcoin could be worth more (perhaps a lot more) in the future. But investors can’t make informed decisions without understanding the risks.

First, historical data is limited. Bitcoin was created less than twenty years ago, while stocks and bonds have been around for centuries. This makes speculation regarding Bitcoin difficult. For example, there is no precedent for its performance during a deep recession.

Secondly, Bitcoin has historically been quite volatile. It has fallen at least 50% from its record high three times in the past five years, and plummeted more than 75% during the most recent cryptocurrency market crash. Investors should expect volatility to persist going forward.

Third, Bitcoin has been associated with fraud, money laundering, and other criminal activities. Some countries have banned cryptocurrency and other countries are still building regulatory frameworks. Future changes in the regulatory landscape could dampen demand for Bitcoin.

Patient investors who are comfortable with such risks should consider purchasing Bitcoin today.

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Trevor Jennewine has no position in any of the securities mentioned. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.

The first cryptocurrency to buy before it rises from 700% to 2,900%, according to some Wall Street analysts was originally published by The Motley Fool

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