Bitcoin Bulletin: Long-Term Bitcoin Price Prediction
It’s the time in the market cycle when bitcoin prices are starting to consolidate and rise, following their crash to what most analysts and indicators now suggest was the bottom. Confidence is returning, with significant new developments in several areas accompanying the increase in prices. It’s the point where the next bullrun’s millionaires and potentially billionaires will be made. And so it’s worth taking a step back from the day-to-day ups and downs of the charts and looking at the big picture: the long time bitcoin price prediction for the months and years to come.
This article is for information only. Bitcoin Bulletin will never give you trading or investment advice.
Bitcoin is only ten years old – in fact, it has been trading on the open market for less than that, even. MtGox launched in July 2010, so we have less than a decade of bitcoin price data to go on. But ten years is enough to establish a pattern, and while the future doesn’t predict the past, we would be foolish to ignore it. In this report, we look at the wider factors surrounding bitcoin adoption, the indicators that suggest the bottom truly is in, and some of the ways we might be able to model and forecast how bitcoin’s price action might develop over the coming market cycle – which, if the previous ones have been anything to go by, will be impressive.
Is the bottom in?
The first question that needs answering is whether the low of $3,100 in December 2018 really was the bottom for bitcoin’s price. Plenty of well-respected traders were expecting another leg down, with bitcoin potentially bottoming in the $1,500–$2,000 region (Tone Vays and Alessio Rastani being two notable examples – both of these have, relatively recently, reiterated their belief in a lower low to come or at least a return to the $3,000 level). Some of these influencers and analysts have since changed their tune, as new data comes to light. There is now broad consensus that the bottom is in, and that we are unlikely to see bitcoin at $3,000 or below. Factors include:
- Bitcoin dropping almost 85% from its high of $20,000. This is in line with the drawdown in the bear markets following previous bitcoin bubbles – for example, in the 2014-15 bear market, bitcoin had topped out at just under $1,200 and fell to a low of $155.
- The 200-weekly moving average has held, as it did in the previous bear market. After capitulation, bitcoin bumped along the 200 WMA repeatedly before finally taking off. While there are no guarantees that the 200 WMA will hold, it is a level keenly watched by traders and represents a reasonable approximation of ‘fair value’ for bitcoin.
- Accumulation waves show UTXOs aging. The transparent nature of the blockchain means we can see when every coin last moved, and there is a clear trend towards increasingly long-term holding – see Willy Woo’s Bitcoin HODL Waves.
- More complex metrics like Delta Cap point to a December 2018 bottom.
The long-term picture for bitcoin
It is very difficult to place an accurate number of the future value of bitcoin. Aside from not knowing the economic, geopolitical and regulatory landscape 10 or 20 years down the line, Bitcoin is an entirely new asset class. It may bear similarities to other asset classes, but borderless, censorship-resistant, decentralised, programmable electronic money is something the world has never seen before. Analysts and influencers who routinely attempt bitcoin price prediction typically have little of consequence to back up their estimates – and most have proven wildly wrong, if not on the value then on the timeframe. With this caveat in mind, we can offer two touch points for anyone attempting a bitcoin price prediction.
- Gold. The first is a simple one: the precedent of gold. Bitcoin is known in the community as ‘digital gold’ due to its scarcity and apparent lack of correlation with conventional markets and asset classes. Bitcoin’s community, particularly its miners, have spent the last few years cementing bitcoin’s reputation as digital gold within the crypto world: the insistence on keeping block size at 1MB and prioritising second-tier scaling solutions signposted the reality that bitcoin was moving ever more towards a ‘store of value’ use case. Gold has an $8 trillion market cap, meaning that – assuming that bitcoin is successful in fulfilling a similar role in the future – it will need to increase in value around 100 times. This points to $500,000 per BTC at some point, though does not offer any meaningful timeframe. (We might posit that if bitcoin does not achieve the status of gold’s replacement in 20 years, at the most, it never will. Interestingly, bitcoin will surpass gold’s stock-to-flow ratio at the next halving, in around a year.)
- The log chart of price development. There have been numerous attempts to predict future bitcoin prices with mathematical models. In fact, price action over the last ten years can be modelled with a fairly simple equation. A recent study by Timothy Peterson, titled ‘Bitcoin’s Growth is Like a Virus’, shows the legitimacy of this approach. The growth of Bitcoin is a function of userbase and network effect, and follows mathematical rules found in the spread of viruses in nature – as well as in parallels closer to home, such as the growth of Facebook’s share price. Based on this modelling, we can suggest a ‘floor’ price for bitcoin over the coming years. This is the sustainable lower bound for price, assuming no ‘Black Swan’ event, and without the multiplying effect of strong bull markets and bubbles. The model suggests that $10,000 will happen next year; the all-time high ($20,000) will be broken in 2021; 2022 will see bitcoin at $50,000; $100,000 will be broken at the end of 2023; and 2025 is likely to see BTC at $250,000. However, we cannot be confident of the long-term validity of this model and would be wary of forecasting further ahead than a few years.
Catalysts to growth
The cryptocurrency community anticipates that the halving of Bitcoin’s block rewards, due to happen in May 2020, will provide a powerful catalyst to growth. This is intuitively obvious, since a halving event reduces the new supply that can come onto the market. After next summer, Bitcoin’s inflation will be below 2% – the annual target for most of the world’s central banks. The Halving is likely to be a strong magnet for price growth, with the next uptrend starting before the Halving and ending some time after it.
This is potentially supported by bitcoin’s market cycle length. The last cycle was almost exactly four years – the same as a halving cycle (210,000 blocks). This is true of the peak-to-peak cycle (November 2013 to December 2018) and low-to-low cycle (January 2015 to December 2018).
Infrastructure, public and institutional interest
Lastly, there is strong evidence of growing institutional interest, feeding through to the public, and supported by an ever-more mature infrastructure. This infrastructure includes technology such as the Lightning Network – a success story that arose almost entirely within the bear market – and the custodial solutions such as Bakkt that are currently negotiating with regulators and will likely come online in the coming months.
As a bellwether for future public awareness and adoption, we have the recent advertising campaign by Grayscale Investments, which seeks to position bitcoin as the new gold for the millennial demographic.
Nothing is ever certain, and blockchain and cryptocurrencies are still new and experimental technologies. However, with the bear market now finally behind us and evidence of positive technological, regulatory and marketing developments across the board, we feel there is room for confidence that bitcoin’s price and that of other high-quality digital assets will enjoy another exponential growth event over the coming two years – and likely further strong (if choppy) growth after that.