Bitcoin(CRYPTO: BTC) passed the all-important $100,000 barrier on May 8 after the U.S. reached a trade deal with the U.K. The deal triggered a surge of investor optimism, and the market switched to a more risk-on mode.
The S&P 500(SNPINDEX: ^GSPC) has already erased its losses spurred by President Donald Trump's tariff plans, and crypto investors are wondering whether Bitcoin might break new ground with another all-time high.
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What's next for Bitcoin?
The question of what's next can be broken down into two parts: the immediate matter of how much digital currencies can grow under a more crypto-friendly administration, and the longer-term question of whether Bitcoin might achieve all its believers hope it might.
Bitcoin in the short term
It's been more than a week since Bitcoin broke the $100,000 mark and, despite bullish hopes, it hasn't gone on to set a new high. Even a trade agreement with China failed to spur crypto's leading lady into action. In fact, Bitcoin's price dipped slightly after the deal was reached.
Some view Bitcoin as a hedge against a falling dollar and wider global uncertainty. It has yet to prove itself in this regard. While it has outperformed the S&P 500 so far this year, it's extremely volatile. At the time of writing, Bitcoin is up more than 10% year to date, while the S&P 500 is up just over 1%, and gold is up more than 20%.
Moreover, there's a lot of correlation between Bitcoin's performance and other high-risk assets, particularly tech stocks. That may change if cryptocurrency continues to transition from a niche alternative asset to the mainstream. Spot Bitcoin exchange-traded funds (ETFs), increased institutional adoption, and the U.S. Strategic Bitcoin Reserve all play a part in that journey.
Some insiders suggest Bitcoin might top $220,000 before the year is out. That looks optimistic given the border economic environment. Some economists warn we've yet to see the full impact of tariffs, and the U.S. has yet to close tariff negotiations with many countries. A lot of investors are in wait-and-see mode. If the economy slows more or falls into a recession, Bitcoin will not be immune.
Bitcoin in the long term
It would be exciting to see Bitcoin soar again this year. But for buy-and-hold investors, what matters more is how it might perform in the coming decade or more. It is still a relatively new asset, and there's a lot we don't know.
Here are some of the ways analysts, such as those at Ark Invest, think Bitcoin could reach $1 million or more by 2030:
A currency for emerging markets: Bitcoin is already legal tender in El Salvador. The Central African Republic initially followed suit, but subsequently reversed its original decision. It is an important driver for adoption and can be useful in countries with unstable currencies or where many people are underbanked.
International remittance: Bitcoin is starting to take market share in the international money transfer market. The blockchain can make it faster and cheaper to send money to another country. Straits Research predicts the global digital remittance market will be worth almost $84 billion by 2032.
As digital gold: Bitcoin's capped supply and decentralized nature could make it an attractive store of value. It is easier to store and move around than physical gold. However, it's also more volatile and carries more risk. It still has a way to go to establish its safe-asset credentials.
For those things to happen, the technology needs to work, and people need to trust crypto. Regulation will help build trust. For example, if the U.S. passes a clear framework for digital assets, it could help crypto projects thrive, particularly if the rules encourage growth while also protecting consumers.
In terms of technology, cryptocurrency is still evolving. There's a huge network of developers working to address various issues, such as security, transaction speeds, and overall efficiency. That needs to continue and -- importantly -- Bitcoin needs to avoid any serious security failures.
Bitcoin relies on cryptography, and quantum computers excel in breaking cryptography. While quantum computing is not sophisticated enough today to pose a risk to digital assets, that could change. BlackRock recently included this risk in the Securities and Exchange Commission filing for its iShares Bitcoin ETF(NASDAQ: IBIT).
Don't count on another all-time high
Bitcoin has a lot going for it right now, from a crypto-friendly administration in the U.S. to an uncertain economic climate that's fueling investor diversification. But if you're looking for a safe bet, make sure you understand Bitcoin's own specific challenges and risks. Don't speculate on another bull run this year -- instead, see whether it makes sense to invest a small percentage of your portfolio into Bitcoin in the long term.
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Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
