Institutional Investors Provide the Answer to Bitcoin’s Future Price

When it comes to predicting the future price of bitcoin (CCC:BTC), it’s almost as if the goal is to be as outlandish as possible. The sky’s the limit. 

Source: Shutterstock

In my most recent article on Dec. 1, I suggested that it was too early to call for bitcoin prices of $50,000 to $100,000. That’s especially true if you think it will happen by the end of 2021. 

At the time, it was trading just below $19,000. As I write this, it’s approaching $23,000. 

Its momentum seems unstoppable. Remember, it closed 2019 at $7,220. With less than two weeks left in a dreadful 2020, it’s up 213%. 

The reality is that the future of bitcoin prices is in the hands of institutional investors. 

Here’s why I feel this way.

Bitcoin at $1 Million Seems Insane

InvestorPlace’s Matt McCall recently explained how bitcoin could get to $1 million, a price that would make Berkshire Hathaway’s (NYSE:BRK.A, NYSE:BRK.B) Class A shares look like a penny stock. 

“[S]ome high-profile individuals have stuck their neck out to make this pronouncement,” McCall stated on Dec. 17.  

“Most notably, Raoul Pal, the former Goldman Sachs hedge-fund manager, stated in an interview with Stansberry Research that “an enormous wall of money” could pour into the cryptocurrency. Moreover, Pal believes that this wave could see bitcoin hitting seven figures in five years’ time.”

This enormous well of money Pal speaks of are the big institutional investors of the world. 

In my last article, I mentioned some of Ray Dalio’s arguments why bitcoin wasn’t the panacea asset everyone thinks it is. In my opinion, his best point was that he couldn’t see big institutional investors or large multinational companies using it when they can hold reserve assets such as gold or the U.S. dollar. 

Now, imagine if Dalio changes his tune and goes long bitcoin. His hedge fund, Bridgewater Associates, manages $236 billion in assets. If Bridgewater committed 10% of its assets under management to bitcoin, we’re talking about a position of almost $24 billion. 

According to CoinMarketCap, the total bitcoin market capitalization is $417 billion. So, a $24-billion position would account for almost 6% of the world’s bitcoin.

This is where it gets tricky. 

Is Bitcoin Really Capped at 21 Million?

CoinTelegraph contributor Benjamin Pirus recently discussed the bitcoin cap of 21 million and whether it was a hard-and-fast limit or something ultimately more flexible. He quoted Canadian economist David Rosenberg. 

“Everybody seems to believe that we’re going to get to that 21 million cap on the supply constraint, but there’s really nothing in the protocol to suggest that the supply of Bitcoin can’t go up once we hit that limit,” Rosenberg said.  

Pirus suggests that Rosenberg believes that those bullish on bitcoin haven’t a clue about the future supply. 

Let’s assume that the cap of 21 million is impenetrable. For Dalio to get his $24-billion…