After the Bitcoin (CRYPTO: BTC) halving on April 19, crypto investors celebrated. As they see it, Bitcoin is now on a trajectory to rally from its current price of $65,000 to hit a $100,000 price level some time within the next 12 months.
But the decision of whether or not to buy Bitcoin now might not be as easy as you think. Notably, several prominent Bitcoin bears have weighed in, claiming that the fourth halving may over-promise and under-deliver.
Are they right? Let’s take a closer look at what to expect from Bitcoin in the post-halving period.
There have been three previous Bitcoin halving events (in 2012, 2016, and 2020), and each one has led to a spectacular rally for Bitcoin. So there is plenty of precedent for Bitcoin to go on another breakout rally in 2024. In the third halving cycle, Bitcoin exploded in price from $10,000 to $69,000, so many investors are expecting the same type of performance this time around also.
But just how much faith can we put in Bitcoin’s historical track record? After all, past performance is no guarantee of future performance. Moreover, it could be the case that previous Bitcoin rallies were correlated with other macroeconomic events, and not with the halving itself. For example, the much-vaunted 2020 halving rally lined up nicely with the response to the COVID-19 pandemic and the massive amount of stimulus money coursing through the economy.
However, several key factors in Bitcoin’s favor lead me to think that we can trust the historical evidence again. For one, there are the new spot Bitcoin ETFs, which just launched in January. These have created a new demand for Bitcoin that never existed before. If investors decide to allocate at least 1% of their portfolios to Bitcoin, with the help of easy-to-use exchange-traded funds (ETFs), then this could be a source of stable, long-term demand for years to come.
In fact, all of this new demand might actually lead to a “supply squeeze,” in which there simply is not enough Bitcoin available for everyone who wants it. The total circulating supply of Bitcoin is capped at 21 million coins, and there are already 19.7 million coins in circulation. The halving will put even more pressure on this supply, since it will result in the rate of new Bitcoin issuance being cut in half.
So the supply of new Bitcoin is slowing to a trickle at exactly the time when demand is at its highest. According to the supply and demand calculations of basic Economics 101, the price of Bitcoin should increase.
If you’ve been following Bitcoin for any period of time, you’re probably aware that there have always been prominent crypto bears who have delighted in poking holes in the Bitcoin narrative. And all of them seem to have awakened from a long hibernation right around the time of the halving.
Image source: Getty Images.
In a recent Bloomberg interview, Jamie Dimon, CEO of JPMorgan Chase (NYSE: JPM), called Bitcoin a “public decentralized Ponzi scheme.” As Dimon sees it, there is no inherent value in Bitcoin itself, and people are only buying Bitcoin because it is going up in price. In fact, he even calls Bitcoin a “fraud,” and says there is no hope for it as a currency.
Moreover, financial commentator and investment advisor Peter Schiff argues that Bitcoin is, well, broken. Transaction costs are still too high, and transaction processing time is too long. Bitcoin is still not widely accepted as a form of payment. When was the last time you used Bitcoin to pay for anything? As a result, Schiff argues that you should be buying gold, not Bitcoin.
Forget the naysayers, though. They have been making similar arguments about Bitcoin for more than a decade. Right now seems like a unique buying opportunity for Bitcoin. Don’t be fooled by the $65,000 price tag. Bitcoin is, if anything, undervalued, not overvalued.
After all, we’re just now seeing Bitcoin tip into the popular mainstream. We’re just now seeing Wall Street firms roll out new investment products specifically targeted at Bitcoin buyers. And we’re seeing the start of a paradigm shift in how people think about Bitcoin as a stand-alone asset class that needs to be added to a portfolio for diversification purposes.
Long-term, I’m bullish on Bitcoin and am looking forward to it hitting another all-time high in 2024. So no, Bitcoin is not likely to collapse in value after the halving, as JPMorgan Chase recently warned. It’s probably going to $100,000 fairly soon, much to the consternation of Bitcoin bears everywhere.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and JPMorgan Chase. The Motley Fool has a disclosure policy.
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