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Where will Bitcoin be in 5 years?
Cryptocurrencies have proven volatile, but they are betting against it Bitcoin (CRYPTO: BTC) was useless in the long term. The cryptocurrency is near an all-time high, supporting the long-term trend of rewarding buy-and-hold investors, despite the bumpy ride.
What does Bitcoin have in store for investors in the next five years? It’s an exciting time for cryptocurrencies, as the halving is upon us. What does it mean?
Here’s what you need to know about the upcoming Bitcoin event and how the cryptocurrency’s price could rise over the next five years.
What is halving?
The next Bitcoin the halving will take place in the next few days. The cryptocurrency operates on a blockchain, a decentralized digital ledger. Computers on the network verify and process blockchain transactions in exchange for Bitcoin as payment.
This practice is commonly called mining. Groups of transactions are called blocks. A halving occurs every 210,000 blocks, which halves the amount of Bitcoin allocated for mining a block.
The halving limits the amount of new Bitcoin coming into circulation. The hope is that long-term adoption of Bitcoin will increase demand while supply increases ever more slowly. This supply and demand dynamic aims to support a higher Bitcoin price.
Investors have flocked to the cryptocurrency over the past year leading up to the halving, likely due to the expected decline in mining rewards. In other words, they buy Bitcoin before it becomes more scarce.
Not once, but twice
Halving is rare; it takes about four years to mine 210,000 blocks. The original reward for mining a block was 50 Bitcoin. Previous halvings reduced mining rewards to 25, then 12.5, and then 6.25 in 2020. The next halving will cut it in half again, to 3,125 Bitcoin per block.
Investors looking at the long term should see two halvings in the next five years. The next one will happen in 2028 and will reduce mining rewards to 1.5625 Bitcoin. Think of it this way: Bitcoin mining rewards will be only a quarter of what they are today within the next five years.
This is bullish news for anyone who believes Bitcoin adoption will continue to increase. Again, higher demand with much slower growing supply could mean higher prices.
The investor’s action plan
There are signs of wider adoption of cryptocurrency. According to a survey conducted by Security.org, 40% of US adults own cryptocurrencies, up from 30% just a year ago. And among those who already own at least some crypto, 63% hope to get more.
This bodes well for Bitcoin, the cryptocurrency’s flagship token. If a majority of consumers supported it, businesses could adopt cryptocurrencies in their payments. The institutions have already taken action Bitcoin investment funds due to consumer demand.
The story continues
The investment plan here is essentially unchanged. Bitcoin has proven that it can be volatile. So far in its history, it has climbed higher over time.
Does this guarantee that the future will include higher prices? Of course not, but as in the stock market, investors can use history to inform themselves about future possibilities. It’s a simple long-term investment thesis for Bitcoin if you believe people and businesses will use it more in the future. It boils down to unlimited demand versus limited supply.
This means using volatility to your advantage, buying on dips and holding. The next five years could be exciting as Bitcoin’s supply growth slows to a crawl.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.
Where will Bitcoin be in 5 years? was originally published by The Motley Fool