Dreams of a $1 Million Bitcoin May Be Irrational: Analyst Explains Why 16

Dreams of a $1 Million Bitcoin May Be Irrational: Analyst Explains Why

BTC Won’t Hit $1 Million Anytime Soon, Unfortunately

Late last year, John McAfee, a cybersecurity guru turned crypto proponent, said in an interview that he expected for Bitcoin (BTC) to surmount $2,000,000 by the end of 2020:  “Run the f***ing numbers. If Bitcoin is less than $2 million by the end of 2020, then mathematics itself is a flawed disappointment.”

He backed this prediction by citing scarcity. In an interview with Forbes, he stated:

“Let’s get real, there are only 21 million bitcoins. Seven million of which have been lost forever, and then, if Satoshi [bitcoin’s anonymous creator] is dead, add a few more million.”

While McAfee seemingly had belief in this prediction, a leading analyst has asserted that this prediction (which McAfee has since gone back on) and others like it are irrational.

The analyst, Josh Rager, advisor of Level and Glassnode. He suggested in a recent tweet that like other markets, Bitcoin is subject to the law of decreasing marginal returns, with each cycle yielding less alpha than the last. Using the decreasing rate of return he calculated from previous cycles, he determined that Bitcoin is likely to only go as high as $75,000 to $85,000 at the top of the next bull run.

Rager’s call for relative rationality in the cryptocurrency market has been echoed by ByteTree, a cryptocurrency analysis and information firm.

In a blog post published late last year, analyst Charlie Morris wrote that using a logarithmic chart, we can observe that for most of its life, Bitcoin has had an internal rate of return (IRR) of 212% per annum. More recently, the IRR has fallen to a mere 115% per annum.

Dreams of a $1 Million Bitcoin May Be Irrational: Analyst Explains Why 17

Should this trend continue, the analyst writes, Bitcoin could “touch a trillion dollars by 2025”, which equates to around $50,000 per coin.

Higher prices could be had before that, though the already unsustainable nature of this trendline suggests more muted growth in the cryptocurrency markets for the coming cycle.

What Will Drive Bitcoin to the Moon?

While all these price predictions, from $50,000 to $1 million, sound crazy in these trying times, there is purportedly a fundamental case for Bitcoin to hit a $1 trillion market capitalization and beyond.

Adam Back, the creator of a Proof of Work protocol that was built on for Bitcoin, recently laid out a number of reasons why Bitcoin appreciating to $50,000 isn’t a “far off” theory.

Back’s expected catalysts for Bitcoin growth include the copious amount of geopolitical uncertainty, best exemplified by the U.S.-China trade war, protests the world over, and populist political movements; the existence of $17 trillion worth of negative-yielding bonds, which don’t abide by any traditional economic standards; and the adoption of Modern Monetary Theory, an economic framework that its critics say will lead to mass inflation.

Photo by Martin Schmidli on Unsplash