Bitcoin at a price of $500,000 or even $1,000,000? That sounds like a huge exaggeration, right?
Well, we will do the math on it and see how realistic it sounds when using past performance to predict future performance.
There have been more and more prominent voices lately making insane Bitcoin price predictions. I have listed some of those predictions below:
Wences Casares, CEO of Bitcoin wallet startup Xapo and a member of the PayPal board of directors, predicted in a speech on May 22nd 2017 a Bitcoin price of $1 million in 10 years (link)
Jeremy Liew, the first investor in Snapchat, and Peter Smith, CEO and co-founder of the company Blockchain, predicted a Bitcoin price of $500,000 by 2030. They stated three catalysts which might lead to the predicted Bitcoin price: (link)
- More people will use Bitcoin for remittances from foreign workers sending money to their home country
- Increasing political uncertainty around the globe will drive more people to buy Bitcoin as a safe-haven investment
- The use of smart phones for transactions will open the door for Bitcoin. They estimate that Bitcoin could account for as much as half of the world's non-cash transactions by 2030. They also assume the average number of Bitcoin users will grow from 6.5 million to 400 million.
- John McAfee stated on twitter that Bitcoin will move above $500,000 by 2020. "if not, I will eat my dick on national television" he says. (link)
- Kay Van-Petersen, analyst at Saxo Bank, predicts Bitcoin price will be at least at $100,000 in 10 years. He believes cryptocurrencies will make up 10% of the daily trading volume of foreign currencies. That would add up to 500 billion dollars volume per day. In his calculations, Bitcoin would account for 35% of the cryptocurrencies. That would be 175 billion dollars of daily trading volume. Today Bitcoin has a daily trading volume of about 1.2 billion dollars. (link)
After having discussed what some analysts and entrepreneurs have predicted, let's do our own math.
In the past 6 years Bitcoin experienced a growth of 63,178,69%. That means the value of 1 Bitcoin experienced a multiplication of 631.79 times from $6.10 to $3,860.
The growth has been as follows:
| Year | Growth |
|---|---|
| 2012 | +121.48% |
| 2013 | +5,371.43% |
| 2014 | -57.18% |
| 2015 | 36.67% |
| 2016 | 122.72% |
| 2017 | 286.39% |
If we use the past 6 years as a model for the future, the average annual growth rate (AAGR) would be 980.25%. Using this growth rate, we could expect 1 Bitcoin being worth $4,865,860.13 in 2020.
This insane growth rate is caused by the insane growth rate BTC experienced in 2013 of 5,371.43%.
So let's exclude that year which is a complete outlier compared to other years.
When we exclude the year 2013 we get an average growth of 102.01%. So essentially Bitcoin price will double every year. That does not sound very unlikely since we have seen Bitcoin doubling in value in time spans less than one year.
Using this figure, 1 Bitcoin would be worth $529,973 in about 7 years, meaning end of 2024.
Below you can see all the results I calculated based on different Average Annual Growth Rates (AAGR):
| - | AAGR 2017 | AAGR 2016-17 | AAGR 2015-17 | AAGR 2014-17 | AAGR 2012, 2014-17 |
|---|---|---|---|---|---|
| - | 286.39% | 204.55% | 148.59% | 97.15% | 102.01% |
| 2017 | $3,860.00 | $3,860.00 | $3,860.00 | $3,860.00 | $3,860.00 |
| 2018 | $14,914.51 | $11,755.73 | $9,595.61 | $7,609.93 | $7,797.73 |
| 2019 | $57,627.65 | $35,802.39 | $23,853.83 | $15,002.85 | $15,752.49 |
| 2020 | $222,665.41 | $109,037.13 | $59,298.47 | $29,577.87 | $31,822.21 |
| 2021 | $860,348.83 | $332,075.46 | $147,410.67 | $58,312.29 | $64,285.24 |
| 2022 | $3,324,270.74 | $1,011,344.57 | $366,449.67 | $114,961.73 | $129,865.05 |
| 2023 | $12,844,529.58 | $3,080,076.60 | $910,960.92 | $226,645.17 | $262,345.29 |
| 2024 | $49,629,513.71 | $9,380,454.61 | $2,264,566.88 | $446,827.27 | $529,973.63 |
| 2025 | $191,761,684.59 | $28,568,422.17 | $5,629,509.51 | $880,912.68 | $1,070,619.76 |
So as you can see, it is not unimaginable that 1 Bitcoin can be worth a half a million dollars or more in the next decade.
Next time someone asks you "when moon?" or "when Lambo?" you can use one of the above models and answer: 2024 (or whichever model you see more realistic)
All calculations were performed based on historical price data found on Investing.com (link)