The world's largest cryptocurrency fund: Bitcoin will reach $200,000 next year and will eventually reach $700,000

Pantera Capital, one of the world's largest cryptocurrency funds, released a new investor letter in mid-April, in which it compared the correlation between the number of Bitcoin users and prices, and predicted that Bitcoin will reach $200,000 next year.

In an investor letter published in April last year, Pantera Capital predicted that Bitcoin would reach $60,000 in 12 months, which turned out to be true. Now, Pantera Capital has issued a new forecast, estimating that Bitcoin will reach $200,000 next year.

Pantera Capital proposed a Bitcoin price prediction model in an investor letter published on the 15th. The model compares the correlation between the number of new Bitcoin users and Bitcoin prices, and finds that for every 1 million additional users, Bitcoin will rise by $200. It is estimated that Bitcoin will reach $200,000 in 2022.

According to the model proposed by Pantera Capital, with the exception of February 2016, the price of Bitcoin has increased at an average annual rate of 213% over the past decade. And $200,000 is exactly 213% of the current Bitcoin price level.

Block Reward Halving

Pantera Capital pointed out that supply and demand is one of the focal points that affect the price trend of Bitcoin. Bitcoin will halve its block reward approximately every four years. After the third halving last year, the reward per block has dropped to 6.25 Bitcoins, further reducing the supply of Bitcoin.

This year, in addition to companies such as MicroStrategy, Tesla, and Square that have directly invested in Bitcoin, large institutions such as Morgan Stanley and PayPal have also opened up Bitcoin investment channels to the outside world, attracting more and more investors to join.

This back and forth makes the demand curve of Bitcoin move upward faster.

Final pricing

To arrive at the final price of Bitcoin, Pantera Capital uses smartphone ownership as the minimum threshold for participation in the Bitcoin market. Currently, about 3.5 billion people in the world own smartphones. Based on the relationship between Bitcoin price and user volume, if Bitcoin continues to grow at a rate of $200 per million users, the final price of Bitcoin will reach $700,000.

This also means that the market value of Bitcoin will reach 15 trillion US dollars, equivalent to 15% of the global M2 money supply.

Not just Bitcoin

Pantera Capital also emphasized that it is not just Bitcoin that needs attention. Bitcoin is just one of the representative works of blockchain, and there are many different use cases.

While being optimistic about the development of DeFi, Pantera Capital believes that cryptocurrencies born out of ecosystems such as Ethereum or Polkadot will perform even better in terms of price.

Pantera Capital also disclosed the investment returns of its three funds, of which the Bitcoin fund has achieved a return of approximately 756% since the end of 2019, while other actively managed funds have achieved returns of more than 2,500%. This also conveys an important message to institutional investors, that "active management" can bring huge returns.