Bitcoin (BTC -0.13%) has had a successful year, with its price increasing by almost 60% so far in 2023 (as of Sept. 15). Following a turbulent 2022 which saw digital asset prices plummet as major players in the industry collapsed, investor interest in the cryptocurrency is growing. It is likely that investors should consider a new price target, even after the impressive gains this year.
Back in November 2021, Bitcoin achieved an all-time high of approximately $69,000. Despite being 62% lower than its peak, I believe that the world’s number one cryptocurrency can reach $100,000 in the next five years. By looking at the quantitative and qualitative factors, I think other investors would come to the same conclusion.
Running the numbers
At present, Bitcoin is trading at around $26,000, with its market cap totaling $500 billion. By using this information, if the crypto reaches $100,000, its price would have increased by 300% in five years, giving an annualized increase of 32%. This return would be higher than the S&P 500 and the Nasdaq Composite, but it would match Bitcoin’s five-year return.
If Bitcoin were to reach the $100,000 target, its market cap would total $2 trillion. This could be seen as a large sum of money, but it is worth noting that the total value of all the gold on Earth is estimated to be around $12.5 trillion. As Bitcoin is increasingly seen as a legitimate and accepted store of value, it is likely that it will slowly approach the total market cap of gold – in our scenario, Bitcoin would only be worth 16% of gold.
At a market cap of $2 trillion, Bitcoin would still be less valuable than Apple ($2.7 trillion) and Microsoft ($2.5 trillion). Therefore, it is not an unreasonable assumption to think that Bitcoin could reach the $100,000 mark, as it would still be lagging behind some of the most successful businesses of all time.
Why should demand rise?
The calculations made so far make sense and are not unrealistic, but it is important to consider why investors, institutions and governments may want to own Bitcoin in larger amounts in the years to come. It is important to analyze the asset’s qualitative characteristics.
According to bitinfocharts.com, Bitcoin can only handle around six transactions per second. This is far lower than Visa, which can theoretically manage 65,000 TPS. This suggests that Bitcoin has not been successful in day-to-day payments, particularly in developed countries where the current payments system works well.
I believe that the key argument for Bitcoin is that more people will use it to store their wealth. Considering that there will only ever be 21 million coins, it is likely that demand will continue to increase, pushing the price up, even if it is not a smooth journey.
Furthermore, Bitcoin can be a useful store of value compared to fiat currency. Government-backed money has been devalued significantly in recent decades due to large amounts of money being created – in the US alone, there is $33 trillion in debt outstanding, a figure which does not include underfunded liabilities such as Medicare and Social Security.
It is clear that more investors, whether individuals or institutions, corporations or governments, are starting to view Bitcoin as a hedge against the traditional financial and monetary system. As more people learn about the cryptocurrency, it is not far-fetched to think that its price could reach $100,000 by the end of 2028.
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bitcoin, Microsoft, and Visa. The Motley Fool has a disclosure policy.