BITCOIN: Possible New Bullish impulse to $26k and Over

Last year was characterized by a tightening of monetary policy as higher interest rates were introduced to combat rising inflation. As a result, investors became disillusioned with risky assets, including growth stocks and cryptocurrencies. Even bitcoin suffered a crushing defeat, falling 65% in 2022.

But things may be changing for the better, as bitcoin jumped 37% in January. Can this cryptocurrency reach the $100,000 per coin mark? At less than $23,000, this price target implies a rise of more than 300%. Let's take a closer look at why this could be very realistic.

After hitting its 2022 low in November, bitcoin has made a meteoric comeback. And this impressive dynamic echoes what we are seeing in the stock markets. The Nasdaq Composite Index, for example, was up 11% in January. And the S&P 500 Index also had a strong start to the year.

While it is usually futile to try to explain such short-term price movements, part of the credit is due to inflationary trends. The Consumer Price Index rose 6.5% year-over-year in December, continuing the slowdown in that measure. And that made investors breathe a sigh of relief. Moreover, the Federal Reserve announced a 25 basis point rate hike at its most recent meeting. A loosening or easing of monetary policy is a good sign for investors, as it can boost economic growth and lead to higher portfolio values.

As the crypto-winter winds down and asset prices possibly continue to rise, there is a fear of missing out. And this will bring new investors into the cryptocurrency space and bitcoin in particular, providing further support for prices.

Aside from bitcoin's immediate catalyst, which is cooling inflation and forcing the U.S. Federal Reserve to eventually stop raising rates, there is another compelling argument for why investors should own this leading cryptocurrency. And this argument focuses on the bigger picture, with an eye on the long term.

The most popular argument for bitcoin is that it will become a more meaningful store of value. Skeptics will be quick to point to the steep drop in bitcoin's price in 2022 as a clear sign that it is a bad hedge against inflation. But if we look at the last five years, bitcoin has risen 154% compared to gold's 43% rise. Bitcoin's superiority becomes all the more noticeable the further back you look.

However, why would anyone want to own bitcoin? In the third quarter of last year, the debt-to-GDP ratio was 120%, which is about as high as it has ever been. And while that figure has fallen since the pandemic began, according to a study by the Wharton School at the University of Pennsylvania, the debt-to-GDP ratio will be 225% by 2050.

Even now, the U.S. government is in a potentially dire situation, as it must once again raise the debt ceiling to avoid defaulting on its loans. So owning bitcoin can be seen as insurance against financial catastrophe since it will undoubtedly become an attractive place to store wealth if things go badly.

It's easy to see that bitcoin, as a widely held asset holding value, could easily soar to a price of $100,000 or more. It all depends on investor sentiment and awareness of the nature of bitcoin, as well as the deteriorating financial situation of governments around the world.

It is not a good idea to bet that bitcoin will reach $100,000 in 2023, as that is too short a time horizon to make accurate predictions. However, if we had to bet on it reaching the six-figure mark in the next five years, it would be done in a heartbeat. It's just getting to a point where it's hard to ignore. And the evolving ecosystem of financial service providers makes it extremely easy to master.

Consequently, investors should invest 1% of their net worth in bitcoin. It won't be as smooth, of course, but the upside potential is enormous.

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