After a big 2023 rally, bitcoin (BTC) prices are now above $30,000 and within striking distance of a new 52-week high.
Bitcoin bulls say fears over contagion among crypto lenders and exchanges that fueled crypto winter in 2022 have finally subsided, and BlackRock’s recent filing for a bitcoin spot exchange-traded fund, or ETF, is an indicator that institutional interest in crypto may once again be on the rise.
But bitcoin bears are cautious about the world’s most valuable crypto, given interest rates may continue to rise and regulatory crackdowns on cryptocurrency exchanges may limit access for investors.
In addition to BlackRock’s ETF filing, a consortium of Wall Street trading firms led by Charles Schwab, Citadel Securities and others, recently launched EDX Markets — a new crypto exchange aiming to compete with Coinbase and other leading U.S. exchanges. In June, the U.S. Securities and Exchange Commission charged Coinbase with conducting unregistered securities sales and charged Binance.US with 13 counts of securities law violations.
Bitcoin has a history of unpredictability and extreme volatility, and 2023 appears to be no exception. The popular crypto is up more than 80% year to date. But its outlook for the remainder of the year will likely be determined by the path of monetary policy, additional clarity on crypto regulations and whether or not the Securities and Exchange Commission approves the first bitcoin spot ETF to ever trade on a major U.S. exchange.
Will bitcoin rise in 2023?
Easing inflation data, the BlackRock ETF filing and the Federal Reserve pausing interest rate hikes in June have catalyzed an aggressive rally in bitcoin prices this year. A brief U.S. banking crisis in early 2023 also fueled fears about the safety of the traditional banking system, pushing bitcoin prices above $30,000 in April 2023 for the first time in nearly a year.
Bitcoin investors have mostly ignored the regulatory crackdown on crypto exchanges, and rightfully so.
Alex Adelman, CEO and co-founder of bitcoin rewards app Lolli, says bitcoin is unique compared to other cryptocurrencies because the SEC has repeatedly made it clear bitcoin is not a security and is therefore not subject to SEC regulations.
“With persistent interest rate hikes, weakness in the banking sector and debt ceiling concerns, investors see bitcoin now more than ever as a sovereign, safe haven asset that has held strong and steady in the face of market uncertainty,” Adelman says.
While several SEC-approved ETFs hold bitcoin futures contracts, the SEC has repeatedly rejected applications to approve a bitcoin spot ETF that holds the crypto itself, citing fears over investor safety. But WisdomTree and Invesco have already followed BlackRock in submitting applications for their versions of bitcoin spot ETFs, hoping the SEC’s stance has finally softened in 2023.
“BlackRock’s actions foretell that there will be a new wave of institutional bitcoin-related financial products to come, as other leaders on Wall Street quickly follow in BlackRock’s footsteps,” Adelman says.
If the SEC finally approves a bitcoin spot ETF, it could open the floodgates for institutional bitcoin investment and potentially send bitcoin prices to new all-time highs.
Bitcoin price history
Bitcoin began trading on online exchanges in 2010 and crossed the $1 threshold for the first time in April 2011. As its popularity and visibility started to rise, bitcoin’s volatility and unique blockchain-based design gained the attention of investors and tech enthusiasts alike. Bitcoin prices reached $1,000 for the first time in 2013, but the crypto garnered significant mainstream awareness when its prices surged to nearly $20,000 in December 2017.
One of the biggest driving forces behind the 2017 crypto bubble was CME Group’s decision to launch crypto futures contracts in late 2017, a mainstream financial institution’s first bitcoin-related financial products.
After the crypto market frenzy died down in 2018, bitcoin prices plummeted to less than $4,000. When stock and crypto trading became trendy again during the COVID-19 pandemic in late 2020, bitcoin prices again soared to new all-time highs. Following a string of bitcoin futures ETF launches in late 2020, bitcoin hit its all-time high of $68,990 in November 2021.
Rising interest rates triggered a sell-off in bitcoin and other risk assets in 2022, and bitcoin prices dropped nearly 65% that year. Luna and its associated stablecoin TerraUSD (UST) completely collapsed in May 2022, and Tether (USDT) and several other major stablecoins temporarily lost their pegs to the U.S. dollar. One of the largest crypto exchanges, FTX, went bankrupt in November 2022 and dragged down a handful of associated companies and exchanges. Heading into 2023, investor sentiment for bitcoin and other cryptos was at a cyclical low.
Today, bitcoin prices are on the upswing again, but longtime crypto investors know the gains and losses can go as quickly as they come. The last time bitcoin completed a calendar year with a gain or loss of less than 60% was in 2015.
Bitcoin price stats
Bitcoin predictions
Bitcoin price movements are notoriously difficult to predict, especially over weeks or months. But momentum seems bullish so far this year, and there is at least some evidence the 2023 bitcoin rally still has legs heading into the second half of the year.
Bitcoin stock-to-flow
One model used to predict bitcoin’s price movement is stock-to-flow, a methodology typically used to value commodities. A commodity’s stock is its total existing supply, and its flow is the total new supply created in a year. Because bitcoin’s new supply is constant regardless of the price of the asset or its market demand, some investors use bitcoin’s stock-to-flow ratio to predict its future price trajectory.
Bitcoin’s current stock-to-flow ratio is about 59.1, roughly in line with gold’s 62.3 ratio, assuming 3,000 tonnes of gold is mined per year. Bitcoin is uniquely designed for its flow to decrease as more bitcoins are mined. Bitcoin undergoes so-called halving, which cuts in half the number of newly created bitcoins issued to miners for validating one block of transactions on the blockchain.
As bitcoin’s flow drops, its stock-to-flow ratio rises. Some investors have used bitcoin’s historical stock-to-flow ratio as a model for its future price.
But the model has its shortcomings. For example, stock-to-flow does not consider basic pricing factors, such as investor demand, macroeconomic conditions or regulatory restrictions. As a result, bitcoin prices plummeted in 2022 after the stock-to-flow model predicted prices would hit $100,000. Thus exposing the flaw of using such a model for bitcoin predictions.
Bitcoin futures
Bitcoin bulls who are confident the crypto is headed higher can leverage their bets by buying bitcoin futures contracts. Futures contracts are agreements to buy or sell an asset at a specific price at a future date, and they can provide a high degree of leverage that can supercharge investor returns. But that leverage can also add a layer of risk on top of an already volatile and high-risk investment like bitcoin.
Nick Rygiel, owner of Ironclad Financial, says the bullish trend in bitcoin prices in 2023 may continue through the end of the year. Still, it’s difficult to predict bitcoin price fluctuations with confidence.
“Predicting the future prices of bitcoin and ethereum is inherently complex due to the volatile nature of the cryptocurrency space,” Rygiel says. “In light of recent technological advancements and upgrades to both platforms, I am of the opinion that we continue to see prices rise through the end of 2023.”
Will bitcoin reach $100,000?
Market experts like Ark Invest CEO Cathie Wood have made headlines for bold, long-term bitcoin price predictions. Wood, for example, has said bitcoin prices could reach $1.5 million by 2030.
Unfortunately, many of these experts making bitcoin price predictions have a hit-or-miss track record of performance and risk management. Even Wood’s former boss at AllianceBernstein, Lisa Shalett, now Morgan Stanley Wealth Management’s chief investment officer, has called Wood a “boom or bust investor” who “doesn’t disinvest or risk manage.”
Lauren Mendoza, certified public accountant and co-founder of Bank Standard, says the long-term outlook for bitcoin will depend on several unpredictable factors, such as institutional adoption, global usage and regulatory framework.
“In the long term, it’s challenging to predict specific price targets for bitcoin and ethereum due to the market’s volatility and dependency on external factors. However, the fundamental principles underpinning both cryptocurrencies — blockchain technology, decentralization and growing use cases — suggest (the) potential for further growth,” Mendoza says.
Frequently asked questions (FAQs)
Because bitcoin has a fixed supply, does not generate cash flow, revenue or earnings and is not backed by an asset that holds intrinsic value, its price is determined largely by investor sentiment and demand.
If bitcoin’s popularity and demand continue to rise over time, nothing is stopping its price from hitting $1 million. But it’s extremely difficult to predict investor sentiment and bitcoin prices have historically dropped sharply when it falls out of favor with investors.
Bitcoin can be an appropriate investment for short-term traders looking to speculate on a volatile asset or long-term investors with extreme tolerance for risk and volatility. But bitcoin has an unproven long-term track record relative to commodities like gold and silver, and you should not assume bitcoin’s past performance will be indicative of its future returns.
