Since reaching a new all-time high in March, Bitcoin (CRYPTO:BTC) has largely disappointed crypto investors. The price of Bitcoin it’s still trading around $68,000, roughly where it was three months ago.

Furthermore, the two big Bitcoin catalysts of 2024 – the launch of new spot exchange-traded funds (ETFs) and the halving of mining fees – have already come and gone. So is it time to rethink the direction Bitcoin could take in the coming years? Let’s take a closer look.

Base case

The base scenario assumes that spot Bitcoin ETFs will continue to see an influx of money from new investors and that Wall Street will continue to embrace Bitcoin as a new asset class for portfolio diversification purposes. Over time, this constant flow of new money should lift Bitcoin.

But how much higher? There are tradeoffs involved in the popularization of Bitcoin, and one of them is that Bitcoin could start to behave more and more like a traditional asset. This means it may no longer generate the astronomical returns it once did.

In the decade between 2011 and 2021, Bitcoin delivered annualized returns of 230% per year, compared to 20% per year for technology stocks. Thus, a more reasonable estimate for Bitcoin’s future annual returns might be closer to 20% rather than 230%.

If we use this 20% growth estimate, then four years from now, the price of Bitcoin could more than double from its current level of $70,000 to nearly $150,000. That’s impressive, but it’s far from the $1 million price tag that some Wall Street analysts are now predicting.

Bull case

The optimistic scenario assumes that the steady flow of money into new Bitcoin ETFs will turn into a tsunami. It also assumes that institutional investors will start making Bitcoin one of their largest holdings. At this time, institutional investors can only allocate 1% or less of their holdings to Bitcoin. But what if they increase that number to 5%, 10% or even 20%? It was then that the price of Bitcoin could really take off.

Image source: Getty Images.

At the same time, the optimistic scenario assumes that the long-awaited Bitcoin halving will occur as originally expected. In the three previous halving cycles (in 2012, 2016 and 2020), the price of Bitcoin absolutely exploded. So why can’t it happen this time too?

In the previous halving cycle, for example, the price of Bitcoin soared from $10,000 in May 2020 to $60,000 in April 2021. Therefore, any optimistic forecast needs to include a prolonged period of very rapid growth in the price of Bitcoin. Bitcoin.

Finally, the optimistic scenario assumes that lawmakers in Congress will pass pro-Bitcoin legislation after the 2024 elections. We are already hearing rumblings of a major shift in the way Washington, D.C. views crypto, and if the next president is optimistic about the Bitcoin, this is where things can get very interesting.

The story continues

bear case

The bear case scenario is basically the “I told you so” scenario. This is what happens when all the warnings from high-profile investors turn out to be correct. For years, some of Wall Street’s top names have claimed that Bitcoin is basically just a giant Ponzi scheme. And Warren Buffett said he wouldn’t pay $25 for all the Bitcoin in the world.

This is not to say that Bitcoin will fall to zero in the next four years, just that it may not provide the kind of transformative wealth that some people hope for. What happens, for example, if the halving fails? Or what if people stop putting their money into the new Bitcoin ETFs? Or what if some crypto legislation in Congress stalls due to political infighting? In this scenario, Bitcoin may never become popular. And if Bitcoin doesn’t become popular, there is no way it will reach $1 million.

Consider a range of potential outcomes

When thinking about Bitcoin, it is important to consider a number of different outcomes. It doesn’t matter whether you call them “bull case” or “bear case” scenarios, just that you recognize that a few small changes to your basic assumptions can have a huge effect on where Bitcoin’s price goes next.

For example, consider Cathie Wood of Ark Invest. While she predicted that Bitcoin’s price could reach $1.48 million by 2030, she also provides a bearish scenario in which Bitcoin could only reach $258,500. These large swings in results are based on adjustments to just a few key parameters, such as the expected portfolio allocation to Bitcoin by institutional investors.

Personally, I am still bullish on Bitcoin in the long term. But I’m starting to lower some of my expectations for Bitcoin over the next four years. Once you start playing with the numbers, you’ll realize how much needs to work out for Bitcoin to reach the mythical $1 million mark.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.

3 bold predictions about where Bitcoin could be in 4 years (the last one may shock you) was originally published by The Motley Fool

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