Despite being a very volatile asset, it's impossible to deny just how wonderful an investment Bitcoin (BTC 1.33%) has turned out to be. Just in the last five years, the world's top digital asset has soared 504%, outpacing the Nasdaq Composite Index by a wide margin.
The leading cryptocurrency currently trades at around $57,000 (as of Aug. 6), which is about 23% off its peak price from March this year. Despite recent volatility, bullish investors have their sights set on a new milestone in the not-too-distant future -- the six-figure mark.
I think it's quite reasonable that Bitcoin could hit a price of $100,000 by the end of 2025. Here's why.
Focusing on the short term
You often hear investors talking about catalysts, or major events that can drive price movements. Bitcoin has had many of these this year, and more could be on the horizon.
Not long after the calendar turned to 2024, the Securities and Exchange Commission (SEC) approved the trading of Bitcoin spot exchange-traded funds. Getting exposure to Bitcoin's price in a convenient, accessible, and regulatory-friendly way has so far brought in a lot of capital to the asset, a trend that should continue.
In April, the Bitcoin blockchain underwent what's known as a halving, a situation where the rate of new supply gets cut in half. This happens roughly every four years. And in the 12 to 18 months after, Bitcoin's price has historically experienced a massive bull run. We're less than four months past the latest halving, so there could be strong returns ahead.
Another ongoing catalyst is simply the more favorable backdrop for Bitcoin's adoption. Businesses are building various financial services that make it easier to use the crypto. And politicians, particularly Donald Trump, are publicly voicing support for Bitcoin. These are all encouraging trends.
I'll also point to the highly anticipated move by the Federal Reserve to possibly start reducing interest rates later this year. Lower rates incentivize investors to take on greater risk (perhaps with borrowed money) in order to generate better returns. This could lead to more capital flowing into Bitcoin.
Think about the bigger picture
While those catalysts can continue to benefit Bitcoin in the near term, investors shouldn't forget about what makes this asset truly special: Its fixed supply cap of 21 million coins. Bitcoin stands out in comparison to the ever-increasing supplies of other cryptocurrencies and fiat currencies, most notably the U.S. dollar.
This makes me believe that a long-term catalyst to keep in mind is investor education. Once more people realize that the U.S. is on an unsustainable path, with its fiscal deficits and alarming debt burden, it makes sense why owning Bitcoin is so compelling. It's a superior monetary network that's global and decentralized, and one that can boost financial freedom.
Making correct predictions is hard
Given these active price-boosting catalysts, Bitcoin's price can rise more than 50% over the next 16 months, reaching $100,000 or more. But always remember to take predictions with a grain of salt. The many variables at play can have a huge effect on the real-world results.
Of course, like other financial assets, Bitcoin faces its fair share of risks. Perhaps no risk is more pressing than the possibility that governments will ban it, especially in the U.S. Making it illegal to mine or own Bitcoin can seriously dampen demand, which can send the price lower. But given that this crypto is becoming a key political tool, and how many powerful businesspeople own it, I don't see a ban happening.
Regardless of what happens in the next year or two, investors should only buy Bitcoin if they plan to hold it for at least the next five to ten years. Having this long-term mindset is critical.
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
