Virtual Currency

What’s Bitcoin’s Realistic Price Target?

Cameron and Tyler Winklevoss sued Facebook (Nasdaq: FB) CEO Mark Zuckerberg many years ago.

The twins claimed the co-founder of the Silicon Valley tech giant stole their idea for the social media platform.

In 2011, the courts awarded the Winklevoss brothers a paltry $65 million settlement. They were mocked because this amount was mere crumbs compared with the billions Zuckerberg and Facebook were worth.

But they took $11 million of that settlement and plowed it into Bitcoin in 2013. They amassed one of the largest Bitcoin portfolios in the world, owning 1% of that total market at the time.

Today, that $11 million stake has transformed into more than $1 billion.

Bitcoin has skyrocketed over the past 12 months… as I predicted it would.

Bitcoin Price

Over the past year, Bitcoin’s price has surged 545%! And that’s after the cryptocurrency’s pullback from its all-time high of $58,332 set back on February 21.

Nonetheless, Bitcoin’s market stands at more than $950 billion. That makes it larger than Facebook’s.

But is there any fuel left in the rally’s tank?

A Whale of a Problem

Back in November, I laid out the case for Bitcoin’s rally to continue in 2021.

Essentially, the reward halving that takes place every four years triggers a two-year bull run. And historically, the second year of the rally has returned hundreds of percent in gains on average.

I also wrote that the percentage of investors who actually hold an entire Bitcoin is very small. And that is one of the best reasons to buy a whole one.

Well, the next leg up in Bitcoin’s price is going to be driven, in part, by this phenomenon.

You see, at the moment, Bitcoin “whales” – investors, like the Winklevoss twins, who own 1,000 Bitcoin or more – account for 42.56% of total supply. This is a very profitable setup. In the past, when the whales have controlled 43% of the cryptocurrency’s supply, its price has taken off.

On top of that, we’re potentially facing a major squeeze.

Clean Coin Squeeze

The current crypto market is very different from what it was four years ago.

Crypto miners, like Bit Digital (Nasdaq: BTBT), Hive Blockchain Technologies (OTC: HVBTF), Marathon Digital (Nasdaq: MARA), Riot Blockchain (Nasdaq: RIOT) and others, are now recognized as “real businesses” and investment opportunities.

At the same time, large buyers, like Goldman Sachs (NYSE: GS), Grayscale Bitcoin Trust (OTC: GBTC), MicroStrategy (Nasdaq: MSTR), Tesla (Nasdaq: TSLA) and dozens of others, are pouring billions of dollars into Bitcoin.

This was unheard of in years past.

And this is creating a situation where the Bitcoin liquid supply change (the change in the number of coins in circulation over the past 30 days) is negative. And it’s been negative for much of the past year.

Bitcoin Liquid Supply Chart

So this means demand for Bitcoin is outstripping supply.

This is a perfect storm for any asset to rally, let alone a digital currency that has a limited supply of 21 million.

When we saw a setup similar to this in 2016 – the previous reward halving before the one in May 2020 – it helped fuel a massive rally all the way into 2018.

And here we have history repeating itself once again.

Right now, there are roughly 4 million Bitcoin in constant circulation. That’s essentially all there is for buying, selling and trading. The cryptocurrency’s total supply today is 18.65 million.

So as more institutional and retail investors push into Bitcoin – through either their digital wallets or a proxy, such as the Grayscale Bitcoin Trust – there’s exceeding pressure on the available supply in circulation.

But this issue goes a step further…

Institutions are buying Bitcoin faster than it can be mined (thanks to the reward halving).

You see, Coinbase (which is going public soon) and other reputable exchanges are the preferred platforms for institutions to buy and sell Bitcoin. That’s because Coinbase allows Bitcoin only from parties that are fully vetted. These coins are “clean,” meaning they didn’t come from hackers, ransomware, theft or other dark web markets.

In turn, institutional buyers bid up the price of vetted, clean coins, which drives up the price of Bitcoin across the board.

All of this is creating the perfect storm for Bitcoin’s rally to continue. Our eyes aren’t on $60,000 or $75,000… but on $100,000 for the price of Bitcoin.

Of course, as the cryptocurrency sets new highs, receives more media attention and draws in new investors, Bitcoin’s bull run will gain steam.

Here’s to high returns,

Matthew