Currently priced at approximately $106,000, Bitcoin remains significantly distant from the $200,000 mark. Considering that the coin has experienced a remarkable increase of over 150% in the past year, it seems reasonable to speculate about the possibility of another prosperous year ahead.
Evidence suggests that reaching such heights is feasible and likely in the long run. Three significant developments are essential to enhance the likelihood of Bitcoin reaching the $200,000 milestone. We will examine each aspect closely.
1. Global liquidity needs to increase
Bitcoin has transitioned from being viewed solely as a speculative asset; however, it remains a consideration fraught with risk for many investors, particularly those affiliated with major financial institutions.
When borrowing costs rise for financial institutions, dictated by the interest rates established by central banks, there is a noticeable decline in the allocation of funds to Bitcoin. In times of capital scarcity, investors tend to favour safer assets over more volatile options. One factor contributing to the correlation between Bitcoin’s price and stock market movements is noteworthy. For the cost of the coin to maintain its upward trajectory, it is essential that interest rates decline further and that global liquidity increases in tandem.
The Federal Reserve, having reduced its benchmark rate in 2024, is anticipated to lower interest rates at least once more in 2025. Anticipation grows within the EU for more significant cuts ahead. The central bank in the U.K. is expected to implement a series of cuts. In China, regulators have indicated that reductions to the primary interest rate are a distinct possibility for this year.
These actions are poised to foster an environment where investors can access inexpensive capital, directing it towards high-risk assets such as Bitcoin. However, should an unforeseen event occur, such as a surge in global inflation, liquidity may reverse course and begin to diminish.
2. New investors need to buy
Cryptocurrency prices surge as buyers compete to acquire as many coins as possible. The arrival of new buyers equipped with fresh capital often leads to an increase in asset prices.
For Bitcoin to sustain its upward trajectory and ultimately reach the $200,000 mark, an increase in buyer participation is essential. Approximately 106 million individuals globally possess Bitcoin, which accounts for around 22% of the adult population in the United States. Despite the widespread availability, billions of individuals have yet to purchase.
Historically, some investors will likely choose to enter the market during elevated prices, driven by increased awareness surrounding the currency. As Bitcoin’s price continues its upward trajectory, it will likely attract increased attention, prompting more individuals to invest.
A specific category of emerging investors is poised to be a significant driver for price escalations. It is essential to delve into this demographic further.
3. Governments and companies also need to buy
Governments, financial institutions, large corporations, and prominent nongovernmental organisations possess significantly greater financial resources than average individuals. Such organisations’ ongoing accumulation of Bitcoin suggests a promising trajectory for the cryptocurrency, potentially leading it to unprecedented heights.
As of mid-2024, governments possessed approximately 2.2% of the coin’s total supply. However, indications indicate a potential increase in this share, with recent developments suggesting this trend is already in motion.
Establishing a Bitcoin reserve in the United States could be a significant priority for the incoming presidential administration. Russia, Poland, and Brazil are currently evaluating the potential of establishing such reserves. El Salvador, having embraced Bitcoin as a legal tender in 2021, is a notable case of effective cryptocurrency policy implementation.
In addition, major corporations such as Tesla have invested in Bitcoin, with the electric vehicle manufacturer’s holdings exceeding $1.2 billion. Additional entities are anticipated to join, particularly if the upward price trend persists.
The anticipated actions are expected to generate buying pressure, subsequently leading to an increase in price. Should these individuals and organisations pool significant capital collectively, it may be sufficient to propel Bitcoin’s price beyond $200,000 in the coming years.