Making Sense of Bitcoin’s Pathway to $500K

By May 3, 2021Bitcoin Business
Click here to view original web page at medium.com
Photo by AbsolutVision on Unsplash

As we all navigate our way through Bitcoin’s third halving cycle and try to digest where it will end, it’s always a good idea to think about what is Bitcoin’s future long term price projection so we can devise a good long term investing strategy.

We have all heard these different future price projections for Bitcoin.

  1. $146k by JP Morgan
  2. $220k by Max Keiser
  3. $288k by Plan B (Stock 2 Flow)
  4. $300k by Willy Woo
  5. $400k by Cathie Woods
  6. $400k by Guggenheim Partners
  7. $500k by Michael Saylor
  8. $500k by Tyler Winklevoss
  9. $500k and $1 million by Anthony Pompliano

While there are plenty of people who believe this could be a Saylor Super Cycle and all previous models are thrown out the window, it is still important to figure out how we can get to these price projections so we know our investing timeframes and risk-reward ratios.

Tyler Winklevoss gives a great breakdown of Bitcoin’s bull case long term but has a very simplistic view of how we could reach $500k Bitcoin (which is basically Bitcoin taking over gold’s market cap).

This aligns with my viewpoint of Bitcoin being the basis of our digital monetary system since every crypto exchange allows you to swap other cryptocurrencies for Bitcoin much like you have been able to do so with fiat currency for gold.

However, in order to be good investors, we need to know the timeframes and when different price targets are possible so we can devise a strategy to invest and dollar cost average into Bitcoin.

Bitcoin Monthly Chart (with Estimated Gains at each Halving Cycle) from Tradingview.com

Here’s my simple mathematical analysis on how we get to $500k Bitcoin by the Fifth Halving Cycle (which will happen in roughly 2028).

Thus far, it appears that each halving cycle, the gains from the pre-halving cycle low reduce by about 1/3.

During the first halving cycle in 2012, Bitcoin went from a pre-cycle low of about $10 and it 100x to about $1200.

During the second halving cycle, we saw a gain of about 33x with Bitcoin’s price going from about $600 to $20k.

Now are in the third halving cycle which if it follow the 1/3 reduction rule, could do an 11.1x gain which would get us to $85–100k.

Using that same 1/3 reduction rule, we could expect that the fourth halving cycle will see an increase of 3.7x from the cycle bottom. If we assume that if this 2020 halving cycle tops out at around $90k-$100k and bottoms out at $65k-70k (for a 35% correction), then that would take us to about $240k-$260k per Bitcoin around 2025–2026 during the fourth halving cycle.

Assuming as Bitcoin gets higher in price that the volatility would decrease in line with stock market corrections of 20%, we could get a post 2024 cycle bottom at around $200k.

Finally, on the fifth halving cycle that should start in 2028, we can expect to see our 1/3 reduction rule go to a 1/2 or 1/4 reduction as the market future removes volatility. In that case we could expect Bitcoin to 2x or 2.5x from the cycle bottom to the cycle top which takes us to $400k-$500k in the fifth halving cycle.

This can all be summed up in the chart below (with the green highlights being future price predictions that have not happened yet)

Estimates for Bitcoin Halving Cycle

This actually closely matches my spreadsheet calculations from the end of 2020. At the end of 2020, Bitcoin had a market cap of about $550 billion. Assuming a quarterly inflow of $225 billion (which is $75 billion per month that I often use in my basic calculations and matches the current market cap inflow for Bitcoin over the past year), then we end up getting $420k Bitcoin at the end of 2029 or $460k Bitcoin at the end of 2030.

Bitcoin Estimates for 2029/2030

Now we have to ask ourselves the question, if we know that there is possibly a 50/50 chance that Bitcoin will reach $500k by the end of the decade, how should we invest? In simplistic terms, if we believe there’s a 50% chance that Bitcoin reaches, $500k we can put up to 50% of our cash into it although a much safer rule would be to put half of that so 25% cash.

If we use the example of the Dogecoin millionaire who makes about $60k per year and save the typical suggested 10% of our income annually, that means the average person should save at least $6k per year.

If about half of that goes to Bitcoin, then let’s say we decide to buy $100 of Bitcoin per month until the end of 2030. Assuming Bitcoin’s price steadily reaches that $460k goal at a rate of $75 billion market cap monthly increase, our capital investment for 9.5 years at $100 a month (which would be $10,800) ends up being worth $29,466 at the end of 2030.

If we dollar cost average $1,000 per month in Bitcoin until the end of 2030, that $108,00 in cash savings would end up being $294,665! This dollar cost averaging strategy over 9.5 years would have net us a 172.8% profit gain. That’s an average annual rate of return of 19.2% over 9 years!

The projected annual stock market gains for the US stock market over the next 10 years is only 3.5%–6%! Perhaps we should all be putting half our savings into Bitcoin! It’s always fun to play the what if Bitcoin game at DCABTC.com

If we started investing $100 a month into Bitcoin 4 years ago (in the middle of the Bitcoin Halving Bull Cycle of 2017), as of May 2021, we would have turned $4,800 into $43,676 according to DCABTC.com

If we started investing $100 a month into the S&P 500 4 years ago, as of May 2021, we would have turned $4,800 into $6,952.39.

This quick bit of analysis makes me start believing that I should be putting in 5% of my monthly savings into Bitcoin. Of course this exact scenario would have to play out for us to 3x our investment but if this is the future of our monetary system, this could end up being the best investment of our lifetimes.

If doctors and car dealerships are looking to invest their spare cash into Bitcoin, that should give us some pause to consider doing the same.

If we at least minimally invest 1–3% per month until the end of 2030, it might end up allowing us to buy a car, pay off our student loans, pay for our kid’s college tuition, or maybe even buy a home in 10 years depending on how much we put in.

To many, investing in Bitcoin sounds crazy, but it’s possible in ten years from now, we end up thinking it was crazy not to have invested Bitcoin.

If you liked this article, I would appreciate a Clap. Don’t forget to follow and if you think any of your friends would enjoy this article, please share it with them. Thanks for reading.

Check out my other Bitcoin and crypto related articles.

Disclaimer: This material should not be considered investment advice. I am not a registered investment advisor or tax professional. Under no circumstances should any of my content be used or interpreted as a recommendation to buy or sell any type of security, cryptocurrency, commodity contract or tax advice. This material is not a solicitation for a trading approach to financial markets or cryptocurrencies. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.

Leave a Reply