When it’s about Bitcoin (CRYPTO: BTC) (and cryptocurrencies in general), few things are certain. However, with a better understanding of the inner workings of Bitcoin, there are a few certainties that come into focus.

With this in mind, it seems clear that just as Bitcoin’s price reaching $1,000, $10,000, and $50,000 was inevitable, so too was reaching $100,000.

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The effect of halving

One of the fundamental characteristics of Bitcoin that most influences its price is halving. A halving event occurs approximately every four years, halving the reward miners receive for adding new blocks to the blockchain. As a check on the only way new bitcoins can enter circulation, by reducing the miner reward, the halving essentially cuts Bitcoin’s inflation rate.

By reducing its inflation rate, the halving changes the dynamics around Bitcoin supply and demand. With halving, even if demand remains constant, its price must increase to compensate for the reduced supply.

Bitcoin has undergone four halvings so far, with the most recent one occurring in April this year, cutting the block reward from 6.25 to 3.125 BTC and pushing its inflation rate below 1%. While it may not seem like a big deal, the halving process is the most significant factor that has affected Bitcoin’s price over the years.

Historically, Bitcoin tends to see significant price increases in the year following a halving. On average, Bitcoin has jumped around 125% higher in halving years. If we measure Bitcoin’s price at the beginning of the year, which was around $45,000, a 125% increase would put its price at $99,000. This historical pattern suggests that Bitcoin could come very close to the six-figure mark by the end of the year.

The Extra Boost Bitcoin Needs

If things play out similarly to the past few years of halvings, Bitcoin could find itself close to six figures, but not quite. To add a little more certainty that it has what it takes to hit $100,000 sooner rather than later, there’s another factor to consider — Bitcoin ETFs in the pipeline.

As of January 2024, 11 Bitcoin spot ETFs have been approved, marking a significant milestone for the cryptocurrency and the broader crypto market. These ETFs are designed to track the actual price of Bitcoin and offer investors an easy way to gain exposure to Bitcoin through traditional brokerages without having to navigate complicated cryptocurrency exchanges. Essentially, Bitcoin spot ETFs democratize access to Bitcoin and open up the cryptocurrency to new buyers.

While ETFs allow retail investors easier access to Bitcoin, the main impact of these ETFs is seen in the realm of institutional investors. Spot Bitcoin ETFs help open the door for institutional investors to buy Bitcoin by providing a regulated and familiar investment vehicle. We are starting to see interest grow, as more than half of the top 20 hedge funds now have exposure to Bitcoin, and that number is likely to continue to rise.

The story continues

We’re still in the early stages of the Bitcoin spot ETF effect, but its significance is already clear. At one point, these 11 ETFs were buying more than 10 times the daily production rate of Bitcoin — and that was before the halving. In the wake of this buying spree, the price of Bitcoin skyrocketed from $45,000 to its current high of over $73,000.

The buying rate has slowed in recent months. But if it were to return to these levels, ETFs would be buying at more than 20 times the daily production rate now that the halving has passed.

The reality that investors need to know

With the added effect of spot Bitcoin ETFs, plus the effects of the halving still materializing, 2024 is shaping up to be the year that Bitcoin hits the coveted six-figure mark. However, it is crucial to remember that investing in Bitcoin should be done with the long term in mind.

To be honest, whatever happens in 2024 shouldn’t matter all that much. It would be nice if Bitcoin kept rising, but even if that doesn’t happen, the cryptocurrency’s long-term potential would still be intact. Thanks to its finite supply, as well as other intangibles like its industry-leading levels of decentralization, security, and resilience, Bitcoin’s value is poised to continue to appreciate as the decades pass.

If there’s one thing Bitcoin has proven, it’s that it rewards the long-term investor. As halvings continue to pile up, holders will start to see their portfolios grow. Whether Bitcoin hits $100,000 in 2024, 2025, or some other year, the cryptocurrency remains an attractive buy as it continues its journey of long-term price appreciation.

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RJ Fulton has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

Prediction: Bitcoin will hit $100,000 by 2025 was originally published by The Motley Fool

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