Unlikely Bitcoin All-Time High Ahead of Halving: Explained

Bitcoin has experienced a significant rally, surging 91% to reach $52,000 in just four months. With its current valuation of $1 trillion, it now ranks among the top 10 tradable assets globally, even surpassing Warren Buffet’s Berkshire Hathaway. To reach $70,000, Bitcoin would need to gain an additional 34.5%, equal to a $350 billion increase in its market capitalization. If this were to happen, Bitcoin would surpass silver and the pound sterling in terms of value. The question remains whether the current conditions support Bitcoin’s $1.35 trillion valuation.

Some argue that Bitcoin has already proven itself capable of reaching such heights, as it reached an all-time high of $69,000 in November 2021. Now, with the approval of spot Bitcoin ETFs in the United States and the resolution of regulatory battles and bankruptcy procedures involving exchanges like Binance and FTX, it seems more likely for Bitcoin to repeat this feat.

The previous all-time high of Bitcoin was driven by low interest rates and rising inflation. In November 2021, fixed-income yields in traditional finance were below 0.50%, prompting investors to seek riskier assets with higher returns. U.S. inflation, as measured by the Consumer Price Index (CPI), soared to 6.8%, the highest since June 1982. These conditions favored scarce assets while causing stock market investors to worry about supply chain disruptions and the effects of COVID-19 on the economy.

The current inflation rates may not present the same level of risk as when Bitcoin reached its all-time high. Data shows that investors are anticipating a 10.9% growth in earnings for S&P 500 companies, a significant increase compared to 2023. This suggests that investors have less incentive to seek alternative assets compared to late 2021.

The introduction of spot Bitcoin ETFs has transformed Bitcoin into a more mature asset class. Since its launch in January 2024, the spot Bitcoin ETF industry has gathered $4 billion in net inflows in the U.S., surpassing $35 billion in assets. This comprises 3.5% of Bitcoin’s market capitalization. In comparison, gold ETFs hold $210 billion, which is roughly 3% of its market capitalization, excluding the portion used in jewelry and medals. This indicates that Bitcoin’s ETF market is more mature now compared to November 2021.

Despite increased adoption, Bitcoin has not yet reached the bullish estimates of a price above $100,000. It currently remains 25% below its all-time high, even lower when adjusted for inflation or the fiat money supply. In contrast, companies like Microsoft and Apple have achieved market capitalizations of $3 trillion, exceeding what seemed possible in November 2021.

While there is hope for Bitcoin to surge above $70,000, especially considering the decline of the dollar, it is unlikely to happen before the halving event in April.