Bitcoin (CRYPTO: BTC) , the world's largest cryptocurrency, has been on an astounding run since President-elect Donald Trump won the election on Nov. 5. The token rocketed close to 45% after Election Day and was on the precipice of hitting $100,000 before falling back to about $92,000 (as of Nov. 26). While Bitcoin can be volatile and is tough to value given that it has no intrinsic value, some think the party might just be getting started and that Bitcoin will soon blow through $100,000 and surge much higher over the next 18 months.
While most Bitcoin followers have heard MicroStrategy's Michael Saylor make the bold call that Bitcoin will hit $13 million in about two decades, this latest call is not from the billionaire but from two analysts at a respected Wall Street firm. Let's take a look.
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Strong sentiment and a familiar pattern
Analysts Matthew Sigal and Nathan Frankovitz in VanEck's Digital Assets group recently released their cycle price target of $180,000 for Bitcoin, implying about 95% upside. They think this can occur within the next year and a half. Frankovitz and Sigel cite several reasons for their bullish target, including growing investor interest and an increasingly favorable sentiment.
... Bitcoin (BTC) price has surged upward in a high-volatility, post-election rally. Now in uncharted territory with no technical price resistance, we believe the next phase of the bull market is just beginning. This pattern mirrors what happened four years ago, when Bitcoin's price doubled between the 2020 election and year-end, followed by an additional ~137% gain in 2021. With a transformative shift in government support for Bitcoin underway, investor interest is rising rapidly; we are receiving inbound calls at an accelerating pace as many investors find themselves under-allocated to the asset class.
Another interesting trend VanEck examined is the popularity of the word "crypto" in Google search and how it correlates with peaks in crypto prices and retail interest in the sector. They found a strong correlation, with big market corrections following all-time highs in search interest in May and November 2021. Sigal and Frankovitz noted that the popularity of the word "crypto" is only about a third of all-time high levels seen in May 2021 and slightly below peaks seen in March of this year. Economic conditions were different in 2021 than now, but VanEck thinks the crypto market has not yet entered "speculative mania, leaving room for further growth before reaching the levels of mainstream attention typically associated with market tops."
The regulatory environment will improve... a lot
With Trump set to take office, VanEck notes that the regulatory environment will transition from a headwind to a tailwind. Gary Gensler, chair of the Securities and Exchange Commission (SEC), has already announced his plan to step down when Trump takes office. Many crypto stakeholders were not fans of Gensler.
They also expect the SEC or Congress to repeal the SEC's Staff Accounting Bulletin (SAB)-121 in Trump's first quarter in office. SAB-121 required financial institutions that wanted to safeguard crypto assets in custody to list them as liabilities on the balance sheet, which could lead to higher regulatory capital and liquidity requirements. Repeal of SAB-121 should lead more banks to launch crypto custodian services.
Sigal and Frankovitz also expect other crypto regulations to be streamlined or rewritten to promote stablecoins and spot-crypto exchange-traded funds (ETFs). Furthermore, the odds of Trump creating a national Bitcoin reserve were at 29% on Nov. 25 but had risen to 48% on Nov. 21. A national Bitcoin reserve would involve the U.S. buying up a sizable portion of existing Bitcoin. A proposed bill is already calling for the U.S. to purchase 5% of the total Bitcoin supply over the next two decades to help solidify the dollar as the world's reserve currency and potentially alleviate some of the country's debt issues.
Price targets are difficult, but Bitcoin's future is still bright
I enjoyed reading VanEck's work and think a lot of good research went into it. However, issuing price targets is difficult, especially for an asset as volatile as Bitcoin, so I would caution investors from reading too much into the $180,000 price target. However, I think Bitcoin can continue to be a good long-term asset. The increasing liquidity through ETFs, continued interest from the mainstream financial system, growing belief in Bitcoin as a hedge against inflation, and a more favorable regulatory environment are all favorable for Bitcoin, although investors should always be prepared for volatility with an asset like this.
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