Can Bitcoin Reach $ 560,000? | Nasdaq


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Bitcoin‘s (CRYPTO: BTC) the price has skyrocketed over 7,200% in the past five years, easily outperforming traditional assets and silencing critics who have claimed the cryptocurrency’s gains are unsustainable.

This year alone, the price of Bitcoin nearly doubled, even as China’s crackdown on cryptocurrency exchanges limited its gains. As of this writing, the price of a single Bitcoin is just over $ 56,000.

Some investors might think that the price of Bitcoin will gradually stabilize at these levels. But more bullish investors – including ARK Invest’s Cathie Wood – anticipate even bigger multibagger gains. Wood recently claimed that the price of Bitcoin could still skyrocket to $ 560,000 by 2026. Is this target overly optimistic?

Image source: Getty Images.

Why Bitcoin Could Soar To $ 560,000

Bitcoin previous earnings were mainly driven by younger retail investors. But after the pandemic struck in early 2020, more institutional investors began buying Bitcoin, according to Philip Gradwell, chief economist at blockchain data platform Chainalysis. These institutional purchases pushed up the price of Bitcoin and attracted even more retail investors to Bitcoin, making cryptocurrency one of the best investments throughout the pandemic:

Bitcoin Price Table

Source: YCharts

Wood believes that if all institutional investors allocated just 5% of their portfolios to Bitcoin, its price could reach $ 560,000 in five years.

But other catalysts are also on the horizon. Higher inflation Where a recession could encourage more investors to buy Bitcoin as well as gold and other precious metals as safe haven investments. Countries struggling with inflation could follow El Salvador’s lead and start accepting Bitcoin as their official currency.

As Bitcoin is accepted as legal tender in more and more countries, major banks, credit card providers and digital payment platforms will have to accept cryptocurrency as well as other fiat currencies.

This cycle could lead more companies to accept Bitcoin and to convince more consumers to buy Bitcoin. The metaverse expansion, which could blur the lines between the physical and digital worlds, could accelerate this process.

Bitcoin could also benefit from the potential collapse of more speculative crypto-currencies like Shiba inu (CRYPTO: SHIB). These investors could turn to Bitcoin instead, and the subsequent market consolidation could stabilize its gains and strengthen its position as the world’s leading cryptocurrency.

Why Bitcoin Might Not Hit $ 560,000

This outlook looks rosy, but three headwinds could prevent Bitcoin from reaching Cathie Wood’s price target.

First, there is the environmental cost of mining Bitcoin. Miners already generate as much CO2 as Greece with their electricity consumption. If the price of Bitcoin reaches $ 500,000, Dutch economist Alex de Vries estimates that miners will produce 617 million metric tons of CO2 each year, which is 40% more than Brazil’s emissions and 70% more than production. from the United Kingdom. Swedish regulators have already called on the EU to ban crypto mining across Europe to help meet the goals of the Paris Climate Agreement.

Second, governments are likely to hit Bitcoin and other cryptocurrencies with stricter regulations, as they could be used to evade taxes, launder money, or finance illegal transactions more easily than fiat currencies.

A growing number of countries, including China, Bolivia, Colombia and Algeria, have already banned cryptocurrency transactions. India, Russia, and the United States are also examining potential ways to regulate cryptocurrency transactions. All of this pressure could stifle Bitcoin’s long-term gains.

Finally, the volatility of Bitcoin could prevent it from being widely used for daily transactions. If you think the price of Bitcoin is going to increase tenfold over the next five years, you would be much more likely to hold on to it. If the price of Bitcoin stabilizes, it would become a more viable payment option, but that stability would also prevent it from climbing to $ 560,000.

Meanwhile, countries could release their own digital currencies linked to their own national currencies to compete with Bitcoin. These transactions could be more stable, easier to follow, and more environmentally friendly than Bitcoin and other cryptocurrencies.

Will Bitcoin Ever Rise Above $ 560,000?

A few years ago, I never would have expected Bitcoin to hit $ 56,000. Therefore, it is certainly possible that more institutional investors will accumulate Bitcoin and propel its price beyond half a million dollars by 2026.

However, I think Cathie Wood’s goal of $ 560,000 is too high. Bitcoin could be worth a lot more by 2026, but environmental and regulatory challenges could prevent it from reaching ARK’s high price target in just five years.

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Lion sun has no position in any of the stocks mentioned. The Motley Fool owns shares and recommends Bitcoin. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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