Key Insights:
Bitcoin's price could grow to $500k levels in this current cycle.
The estimate was based on the Bitcoin Rainbow Chart from Blockchain Center.
Bitcoin is still in an accumulation zone despite the recent growth from $69k to $106.4k ATH.
However, risks like high taxation still pose roadblocks to high Bitcoin growth.
Bitcoin's rainbow charts have lately indicated that the price of BTC has a lot more room to grow signaling that the current high of $106.4k might not be the temporary high for the crypto markets. The current chart indicates that in the current bull cycle, Bitcoin could touch $500k. The Bitcoin cycle is a 4-year cycle that has three bullish years of growth followed by one bearish year.
Bitcoin Rainbow Charts 16 Dec 2024
According to the graph, Bitcoin is in an accumulation zone at present. The highest possible point in this graph, the overvalued zone, could see Bitcoin hit $500k. The present high rate of BTC accumulation in the crypto markets by institutions, whales, retailers, and crypto ETFs testifies to this graph.
Bitcoin's rainbow charts indicate its current valuation measure in the markets. This graph divides the price into ten zones, the first signaling an overvalued zone while the last zone indicates cheap valuation.
Maximum Bubble Territory - This is where Bitcoin is extremely overvalued.
Sale Zone - This is where most sellers sell their holdings on the expectation of a price fall.
FOMO Zone - Here, buyers panic to buy Bitcoin after having missed most of the rally.
Bubble Identification - This zone indicates that Bitcoin might be entering a bubble phase where its price growth does not reflect true demand but is rather driven by speculation.
HODL Zone - This is the zone where it is recommended to start buying BTC and hold it for the long term.
Cheap Valuation Zone - This is where Bitcoin is seen as cheap compared to its past price levels. Here, cheapness is not relative to other assets but to its own price over time.
Accumulation Zone - This is the zone where BTC is currently, as per the Rainbow Chart. Here, most investors scramble to buy Bitcoin in hopes of a bullish future.
Buying Zone - This zone confirms that a revival in Bitcoin is possible and this is where most investors start buying BTC.
Fire Sale Zone - In this zone, Bitcoin is so undervalued that it could look extremely undervalued.
Dead Zone - This extremely undervalued zone signals that all the possibilities of Bitcoin's revival are dead and only a miracle could save it. This zone has never been seen in Bitcoin's history.
The chart might not be a true measure of Bitcoin's valuation; however, it is a relatively dependable chart for comparing Bitcoin's current price with respect to its price history.
Driven by institutional adoption, Bitcoin has achieved a new height. This adoption is driven by three kinds of investors, i.e., traditional fund houses, whales(including institutions like $MSTR), and retail buyers.
Traditional fund houses like pension funds that were initially not able to buy either Bitcoin or its ETF or are unable to do so even now due to legal issues have started buying shares of companies that invest directly in Bitcoin, like MicroStrategy. The number of buyers in this group is difficult to ascertain because of changing asset ownership dynamics.
The second type of investors include whales and institutional investors (not ETF buyers). These investors are also referred to as the "smart money" and include professional asset management companies. Whales, which form another part of this second subgroup, have been one of the top drivers of Bitcoin's growth since 2009. This group has approximately 1.05 individual entities (both crypto whales and institutions).
The third group primarily comprises retail investors who have bought Bitcoin via exchanges, decentralized methods, or ETFs. It is estimated that this group comprises 53.5 million individual addresses.
Despite the swearing-in of crypto-friendly US President Donald Trump in the next month and every investor's high appetite for Bitcoin, the road to $500k would not be easy. This is because of a few roadblocks that need attention, such as capital gains tax rates across the world, attitudes towards digital assets, and the appeal of hard assets like precious metals and real estate.
Capital gains taxes on digital assets have been high for the last couple of years. Recently, Italy introduced a 42% tax on capital gains for Bitcoin. France is exploring a law to tax unrealized assets, and the Netherlands has already passed one such law to tax HODLed Bitcoin.
India's controversial 30% tax law for Bitcoin with a non-set-off clause is another such hurdle to high adoption rates.
Attitude towards digital assets among conservative investors also hinders higher adoption. Lately, this attitude has been changing due to the phenomenal rally in crypto markets.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information but will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.