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Three fundamental drivers for Bitcoin’s potentially bright future

Three fundamental drivers for Bitcoin's potentially bright future

Bitcoin (BTC) is trading back above the $23,000 mark but the flagship digital asset is still far cry from its all-time high of $67,000 it reached in November 2021. 

Nevertheless, the maiden cryptocurrency may have a bright future if three fundamental forces, namely inflation, halving, and adoption – continue to exert their strong influence.

Inflation and Bitcoin’s deflationary nature

According to some financial experts, including Bloomberg’s senior commodities strategist Mike McGlone, Bitcoin could emerge as one of the biggest beneficiaries in the deflationary circumstances that could play out in the second half of the year. 

Elsewhere, an Austrian economist and author of ‘The Bitcoin Standard‘ Saifedean Ammous addressed the rampant inflation impacting economies around the world in May, stating his opinion that “Bitcoin fixes this,” among other issues.

As for inflation of the decentralized finance (DeFi) asset itself, a chart by Bitcoin advocate and software engineer Jameson Lopp demonstrates that Bitcoin’s annualized inflation rate is continuously dropping as along with the diminishing amount of tokens left to mine.

According to these estimates, the inflation rate by December 2030 will stand at around 0.39%.

Past and predicted Bitcoin annualized monetary supply inflation rate. Source: Jameson Lopp

Post-halving historical bullishness

Throughout its history, Bitcoin has gone through several halving events that were followed by substantial price hikes.

After the first halving in November 2012, its price went from $12 to $1,200 in a year. The second event of July 2016 saw a hike from $647 to $19,800 or 2,960% by December. One year after the latest halving event in May 2020, Bitcoin climbed from $8,700 to $49,000 on May 11, 2021, which was an increase of 463%.

Considering the recent halving track record, Bitcoin’s price has been rising increasingly on par with the behavior of the 2016 halving. Taking into account the average price increase between the first two halving events and the price during the 2020 halving, Bitcoin is likely to trade at $284,272 by the next halving event predicted for 2024. 

In addition to the next one, Bitcoin is set to go through one more halving event by 2030

Institutional adoption

Finally, the interest of major organizations in cryptocurrencies is providing a major push to the price of the flagship digital asset, as institutional adoption provides crypto with more legitimacy. 

One of the most recent examples is the global investment management corporation BlackRock (NYSE: BLK) which has recently partnered with Coinbase in order to link its institutional clients who own assets on the crypto exchange with its asset manager suite of tools.

Other examples of institutional adoption of crypto include the banking giant Goldman Sachs (NYSE: GS) which announced in April that its private wealth management division would start offering its first investment vehicles for Bitcoin, as Finbold reported.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk. 

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