Cloud Hosting

Source: CNBC.com

Bitcoin (BTC-USD) appears to be at another inflection point here. The crypto asset had gained as much 84% from its low point in late 2019, and is up by roughly 150% since my "Bitcoin: The Bottom Appears To Be In" article was released in late 2018. However, despite a valiant effort Bitcoin was unable to successfully penetrate the crucial $10K level on a sustainable basis in recent weeks.

Source: BitcoinCharts.com

Nevertheless, if we look closely we see that this is likely only a temporary setback:

Source: Binance.com

We have a beautiful cup and handle pattern developing. Moreover, Bitcoin recently successfully tested the crucial $9,500 support level. Now we are seeing the formation of the handle, and Bitcoin is likely to break out above the $10K-$10.5K resistance soon.

Next level of resistance will come at $11K, and then at around $12.5K-$13K. Once Bitcoin can break out above these levels, it's likely headed to $15K, then to previous all-time highs around $20K, and then higher after that.

Bitcoin and other systemically important cryptocurrencies are leading components of a rapidly-developing industry which has enormous growth potential going forward. Bitcoin and other digital assets are likely to become more popular and could become widely used over the next several years.

Thus, as the use of Bitcoin and other cryptocurrencies increases so should the value of the underlying digital assets due to the "Network Effect" and other factors. Increased use and growing popularity, continuous fiat money printing, as well as other elements could lead to rapidly-growing demand for Bitcoin and numerous other market-leading crypto assets. Therefore, prices for Bitcoin and other key market leading digital assets will likely go up significantly over the next several years.

Now, when I say move up significantly during the next several years I'm not talking about Bitcoin going to $15K or $20K. Bitcoin may attain these levels within the next year or sooner if no major setbacks occur. Moving up significantly means that Bitcoin will likely reach new all-time highs of roughly $75K - $100K in its next major peak.

There are numerous reasons why Bitcoin could hit a price range of $75K-$100K over the next several years, but some of they key factors include:

1. Historical price trends which enable Bitcoin to move in waves, where each consecutive peak is significantly higher than the previous one.

2. The Network Effect, meaning that as the number of users increase on Bitcoin's blockchain, so does the price. In fact, there's a direct correlation between the number of users on Bitcoin's blockchain and its price.

Source: SeekingAlpha.com

It's somewhat similar to Facebook (FB), as Facebook would not be very valuable with 100, 1,000, or even with a million users. Yet, given that Facebook has roughly 2.5 billion AMUs it's one of the most dominant and powerful companies in the world.

Bitcoin is not a company, but it benefits from a similar phenomenon. The more users join Bitcoin's blockchain network, the more demand it creates for Bitcoin, and the demand drives BTC's price higher.

3. Extremely low market penetration. Despite there being so much noise about Bitcoin, there are only about 46 million blockchain wallets worldwide. This is roughly 1% of the global Internet-using population. Furthermore, if we factor in that many blockchain wallets have been abandoned due to various reasons (lost keys, many users having multiple wallets, etc.) the number of Bitcoin owners/users is substantially smaller than 46 million.

Image Source

By my latest calculations the real number is closer to 25 million, which implies a market penetration rate of roughly half of 1%. With a potential 99.5% untapped market it's very likely that Bitcoin and other digital assets are still in the early stages of their development cycles and have a lot of growth ahead of them.

4. Bitcoin and other digital assets are in many ways superior to fiat currencies. First, many are essentially inflation proof. There are only 21 million Bitcoins that can ever be mined, as opposed to the limitless number of yen, dollars, euros or any other fiat currency that can be printed or digitally created by central banks.

5. There's no centralized third-party involvement. With Bitcoin, you don't need to worry about being charged for every transaction by a predatory third party (commercial bank). Our current financial system is essentially corroded with greed. If you want to take money out of the ATM, you pay a fee. If you want to use your debit card overseas, you pay a fee. If you want to transfer funds from your account in the U.S. to your own account in a bank in another country you pay a fee, etc. and etc.

The saddest thing is that even if you do nothing with your fiat money you are still paying an inflation fee, as inflation slowly but surely essentially eats away the value of your fiat money.

With Bitcoin and other true decentralized digital coins you are essentially free from the predatory banking system. It's your own money and you can use it how you want it, when you want it, and you don't have constant parasitic elements eating away at your money. To the contrary, as the value of fiats slowly erodes the value of Bitcoin and other digital currencies should rise.

I believe it is Henry Ford who once said:

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

Source

I believe that many people still do not understand how the banking and monetary system that has been imposed on the world really works. What's worse in my view is that many don't seem to care as they have become accustomed to the current monetary financial order. Nevertheless, Bitcoin and digital assets in general can change all this and with time they likely will.

This means that the optimal currency/payment system, which in my view is Bitcoin/blockchain/digital assets, will continuously capture market share from the parasitic, "old world" financial fiat order.

In 2017, there was around $90.4 trillion worth of broad money supply, and a high end estimate of $1.2 quadrillion in derivatives in the world. I'm convinced that these numbers are likely much higher now. In fact, just from the U.S. there's around $670 trillion worth of derivatives floating around. I want to emphasize that this is up from just $89 trillion in 2000, which is astounding.

Image Source

It's not just derivatives. In fact, if we look at financial statistics in the U.S. and in other developed nations the image is stunning and quite troubling. For now let's focus on the U.S. since it's the largest economy in the world and still creates the worlds "reserve currency."

Now Let's Look at Money Creation Figures

The takeaway here is that the Fed and other major central banks need to continuously create more fiat currencies to fuel their country's enormous budget deficits and servicing payments. Even with the 10-year at around 1.5-2% the U.S. will pay around $350 - $470 billion in debt servicing payments alone over the next year or so.

Therefore, the debt will continue to rise, and it will most likely rise faster than GDP. This means that the Fed will need to lower rates further and will have to expand the money supply perpetually to keep up with servicing payments and to essentially try to inflate the debt away.

There's also the fact that a recession will arrive eventually. This also will require lower rates and fresh rounds of QE to enable the U.S. to absorb the financial shocks of a recession and then to help stimulate the economy back to growth. Thus, we could be looking at "QE 4ever" going forward, and naturally this means a whole lot of fiat money creation.

The problem is that this will hurt the USD. Furthermore, all major central banks are essentially doing the same thing, lowering rates, continuously flooding the financial system with new capital, etc. Therefore, inflation resistant assets like gold, silver, Bitcoin and other market-leading digital assets should continue to appreciate perpetually on a long-term basis.

Given the current economic circumstances and considering that fiat creation will likely intensify in the future, people may begin to lose faith in the old world financial order. The likeliest place for the to turn to will be Bitcoin, and systemically important alt coins such as Litecoin (LTC-USD), Dash (DASH-USD), Zcash (ZEC-USD), and others.

Therefore, substantial price appreciation in this segment is extremely likely due to future demand which ultimately drives price. Due to this phenomenon, Bitcoin's past price movement trajectory, and other elements Bitcoin's next peak could be around $75K-$100K, and may arrive within the next 2-5 years.

Risks to Consider

Bitcoin is a very volatile asset and is not suited for everyone. Numerous factors like increased government regulation, hacking, functionality issues (such as speed, cost, and scale), fraudulent activity, and other negative elements could impact Bitcoin's popularity and thus effect BTC's price negatively.

Therefore, for investors with low to mild risk tolerance perhaps a position size of 3%-5% of total portfolio holdings may be appropriate. For investors with higher risk tolerance a position size of 10% or more of total portfolio holdings may make sense.

Please keep in mind that no one knows exactly how Bitcoin's future will play out. The digital asset could be worth a lot more than it is now several years down the line, or it could be worth a lot less if negative elements begin to materialize surrounding the digital asset market.

Want the whole picture? If you would like full articles that include technical analysis, trade triggers, portfolio strategies, options insight, and much more, consider joining Albright Investment Group!

Disclosure: I am/we are long BTC-USD, AND OTHER DIGITAL ASSETS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article expresses solely my opinions, is produced for informational purposes only and is not a recommendation to buy or sell any securities. Please always conduct your own research before making any investment decisions.

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5 Reasons Why Bitcoin Is Likely Going Much Higher From Here - Seeking Alpha