Is Bitcoin Headed to $100,000?

This is really the million-dollar question: where is Bitcoin headed? Specifically, if and when Bitcoin will touch the magical $100,000?

Background

Since the start of 2021, Bitcoin has had a tumultuous journey (to put it very mildly). But wild price fluctuations have been a part and parcel of Bitcoin's journey right from the onset. I downloaded the daily Bitcoin data from Bitstamp; one of the oldest crypto exchanges out there. We can see that just from 2016 to 2021, Bitcoin has seen several changes in its fortunes

Figure 1: Bitcoin Prices From 2016-2021 (Data Obtained From Bitstamp)

Bitcoin prices underwent a major boom in 2017 (reaching almost $20,000 from just $998 on January 1 2017) only to undergo a sharp decline (of nearly 65%) in early 2018. Many factors were attributed to Bitcoin's meteoric rise in 2017, including allegations of market manipulation. But controversies are nothing new in the world of Bitcoin; with the digital currency attracting both ardent admirers and staunch critics. Indeed till a few years ago, Bitcoin was regarded as a go-to for criminal operations. However, Bitcoin is very much around and increasingly being adopted by respected institutions and even becoming legal tender in El Salvador.

What Is So New About Bitcoin This Time Round?

History repeats itself. So goes the adage. In a manner of speaking, Bitcoin's price boom followed by a bust repeated itself. Bitcoin prices surged from late 2020 onwards and breached the magical $60,000 level earlier on in the year, only to plummet back into the $30,000s. At the time of writing, Bitcoin prices stand at $ 31,947.40. However, what is new on the Bitcoin landscape is who is buying. Bitcoin has caught the fancy of big institutional players including big investment banks such as JP Morgan Chase (it is preparing to offer an actively managed bitcoin fund to certain clients), Goldman Sachs and blu chip companies such as MicroStrategy and Tesla. In fact, Elon Musk's positive tweets contributed to Bitcoin prices reaching new levels earlier on in this year and his criticism contributed to the subsequent downward spiral. In my humble opinion, all of these tweets by Elon Musk, including his concerns about Bitcoin mining's environmental impacts is a cynical attempt at price manipulation (and at this point, he has been successful). However, Elon Musk's antics don't change the fact that crypto-payments are now being supported by mainstream institutions like PayPal and Visa. Increased institutional acceptance is going hand-in-hand with governmental attempts to regulate Bitcoin. As of today, the crypto-exchange Binance has been banned in the UK and new restrictions and regulations have come into force in China and India.

What Is Next For Bitcoin?

I carried out a time series forecasting of future Bitcoin prices based on historical price patterns. I used Facebook's Prophet algorithm for this forecasting. The Prophet algorithm supports the forecasting of univariate time series data based on an additive model where non-linear trends are fit with yearly, weekly, and daily seasonality, plus holiday effects.

Figure 2: Facebook Prophet Based Bitcoin Price Forecasting

Strictly based on historical price action, Bitcoin could come very close to $100K after 2022. However, this forecast model does not account for external factors like Elon Musk's tweets or changes in governmental policy. So if Bitcoin can cross the great Rubicon is something only time will tell.