looks like Bitcoin (BTC -0.22%)has shaken off the longest crypto winter frost in history after rallying more than 150% in 2023. But last year was a great year for the world’s original cryptocurrency, and 2024 is shaping up to be just as great.
There are several reasons for this, but the most obvious and powerful reasons relate to evolving supply and demand dynamics and historical patterns. History doesn’t always repeat itself, but it often rhymes. And if things similar to the past few years play out in 2024, Bitcoin could have what it takes to reach the coveted $100,000 mark, an increase of more than 120%. there is.
This is why we shouldn’t rule out the possibility of Bitcoin reaching six digits this year.
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One of the well-known properties of Bitcoin is that its supply is finite. With a supply of up to 21 million coins, Bitcoin derives much of its value from the idea that it becomes rarer over time.
But how does Bitcoin maintain this scarcity? The answer is relatively simple. It all comes down to the “halving” mechanism built into the code.
After every 210,000 blocks added to the blockchain, or approximately 4 years, the rate of increase in Bitcoin’s supply is cut in half. Currently, the annual growth rate is hovering around 1.75%, but it will fall to just 0.875% by the next halving in April 2024.
With 19.6 million coins currently in circulation, the halving will force the remaining 1.4 million into the market at a gradually decreasing rate until some point in 2040, when the last Bitcoin is expected to be mined. will be done.
Halving forms the basis of Bitcoin’s strong monetary policy and long-term value proposition. But they also influence more immediate short-term price trends.
There are other factors that affect the price of Bitcoin, but the basic law of supply and demand plays a big role. In years when a halving occurs, prices typically rise as demand is forced to compete for a more constrained supply. But most importantly, demand does not have to increase for prices to rise. If demand does not change, or at least remains constant, the lower growth rate will put pressure on Bitcoin’s price.
You can see evidence of this if you track Bitcoin over the past few years. In years when a halving occurs, Bitcoin gains an average of 128%. Although past performance is not indicative of future results, if a similar situation occurs in 2024, the price of Bitcoin could reach around $96,000. This is close to his six-figure goal, but not quite there yet.
Bitcoin enters unprecedented territory
The halving itself is a significant event that changes the trajectory of Bitcoin. However, the halving, scheduled for April 2024, will be different.
For the first time in history, there will be fewer Bitcoins available on the market than during the previous halving. In the past, the supply of Bitcoin has increased significantly. However, the most recent halving passed in May 2020, exceeding the threshold.
Data extrapolated from the supply available on exchanges suggests that demand finally outstripped supply at the time of the May 2020 halving, when the block reward dropped to its current level of 6.25 Bitcoin. doing. Since its peak of 3.2 million Bitcoins in March 2020, the number of available Bitcoins has fallen by nearly 30% to just 2.3 million Bitcoins. This was the lowest level since March 2018.
There are probably several factors that explain this phenomenon, but the most likely culprit is stubborn Bitcoin holders who are famous for never selling. During the crypto winter, long-term holders experienced a historic phase of accumulation. Even as the price plummeted, avid Bitcoin investors continued to scoop up Bitcoin, believing it was a discount. Currently, the total number of coins held by long-term investors has reached 14.78 million coins, which corresponds to about 75% of Bitcoin’s total circulation.
Happily for these long-term holders, these will likely push Bitcoin into unprecedented territory during the April halving. A shortage of coins available on the market and a reduction in supply growth could cause the price of Bitcoin to soar, but by how much remains to be seen. However, given the magnitude of the supply tightness and the combined impact of the halving, compounding effects should prove capable of being introduced and pushing Bitcoin past the $100,000 level.