As the cryptocurrency market continues to evolve, opinions on its future trajectory vary widely among investors and analysts. Recently, Michael Saylor, CEO of MicroStrategy, made a bold statement regarding Bitcoin’s potential growth rate over the next 21 years. In this article, we will delve into his prediction, compare it with our own Rate of Adoption model, and provide an updated forecast for 2025.
Saylor’s Prediction: A 29% Annual Interest Rate
Michael Saylor claims that Bitcoin’s price will grow at an average annual interest rate of 29% over the next 21 years. He also predicts that by 2045, in his best-case scenario, Bitcoin will be worth $13 million. As he put it, "Every Bitcoin you don’t buy is gonna cost you $13 million, my friend." This statement is certainly attention-grabbing and warrants further analysis.
The Rate of Adoption Model
Those familiar with our work are aware of the "Rate of Adoption" model, which correlates Bitcoin’s price to the growth rate of non-zero wallets. We first presented this model in February 2020 at the Quant Workshop Conference organized by Diaman Partners Ltd. The initial prediction for the 2021 peak was $63,000, slightly below the all-time high of $67,000 in October 2021.
In 2023, we updated the model and published the results in Cointelegraph. The prediction for the current cycle was $130,000, a price Bitcoin will soon reach. With the approval of Bitcoin ETFs in the United States and 11 companies promoting such an instrument, it’s clear that the parameters have changed.
Comparing Saylor’s Projection with Our Model
We compared Saylor’s projection to our model before providing a short-term prediction. While he predicts an average annual return over the next 21 years, our model uses a more sophisticated power law approach. This method relates the average price per wallet to the number of non-zero wallets in circulation, multiplying these variables to derive the expected market capitalization of Bitcoin and its corresponding price.
The Power Law: A Fundamental Concept
The power law is a fundamental concept in describing the trend of Bitcoin’s price over time. It illustrates how the price grows exponentially as the number of non-zero wallets increases. This relationship is crucial for our model, as it enables us to estimate Bitcoin’s potential trajectory.
Assumptions and Projections
All projections are based on the assumption that Bitcoin will continue to exist and its adoption rate will follow a power curve, as it has thus far. We calculated two possible scenarios: one with a median curve, predicting a price of $8.3 million by 2045; and another with a higher curve driven by a semi-exponential surge, potentially exceeding $21.6 million.
The Importance of Long-Term Holding
It’s essential to remain aware of Bitcoin’s potential trajectory, as the market is filled with investors who settle for gains of +60% or +100%, only to exit too early and miss out on subsequent price increases. We’re not advocating for holding Bitcoin indefinitely, but rather encouraging long-term holding until it becomes clear that it will be replaced by something more attractive.
The 2025 Forecast: A Relative Peak
Considering the increased adoption driven by Bitcoin ETFs, we recalculated our model to estimate the relative peak for 2025. The forecast is a significant $261,000, nearly double the previous estimate.
Current Dynamics of Bitcoin’s Price
As illustrated in the chart above, even with Bitcoin hitting all-time highs, we are still far from the upper boundary projected to mark the relative peak for 2025. It’s essential to understand that no guarantees exist for these values materializing, and this should not be considered investment advice.
A Word of Caution
Before making any investment decisions, conduct thorough research and analysis with a qualified financial adviser who can guide you on the appropriate allocation within your portfolio. Understanding the dynamics and potential of Bitcoin thoroughly is crucial to avoid missing out on its extraordinary price increases.
In Conclusion
The debate surrounding Bitcoin’s future trajectory will undoubtedly continue. While Saylor’s prediction may seem bold, our Rate of Adoption model provides a more sophisticated approach to estimating Bitcoin’s potential growth. With an updated forecast for 2025 and a relative peak of $261,000, investors should remain aware of the power law driving Bitcoin’s price.
Subscribe to Our Newsletter
Stay ahead of the market with critical insights on investment opportunities, risk mitigation, and trading strategies. Delivered every Monday.
