It's a phenomenon familiar to anyone who follows the cryptocurrency industry. A prominent figure—the CEO of a digital currency exchange, a key developer or researcher, a successful cryptocurrency investor—makes a dramatic prediction about the price of Bitcoinor the general movement of the digital currency sphere.
Sometimes, these predictions come to pass, and the predictor is briefly hailed as someone of note. But more often than not, these predictions never come to fruition. Nonetheless, many analysts and experts continue to make price predictions for Bitcoinand other digital currencies, and investors still seem to take heed.
If you're a cryptocurrency investor, it's wise to take any cryptocurrency price predictions with a healthy dose of skepticism—here's why.
Key Takeaways
- Cryptocurrency investors should take a price prediction with a good degree of skepticism.
- One of the major problems with many price predictions about Bitcoin is that they lack sufficient analytical support to back up their claims.
- Some prominent figures in the industry who push for sky-high prices are doing so for reasons that are not linked to fundamentals.
- Bitcoin prices are mostly influenced by traders unless an event triggers exuberance or panic.
Bitcoin Predictions Are Easy to Believe
One of the major problems with many price predictions about Bitcoin is that they lack sufficient analytical support to back up their claims. An outlandish price point, particularly one in the upward direction, will always tempt investors.
Someone holding a cryptocurrency currently priced at $100 can easily be swayed to believe that the token will skyrocket to $10,000 simply because they want it to be true, and it has happened in the past. However, the issue is that many predictions are delivered without evidence and proper analysis to support them.
Bitcoin Price Predictions are Hype, Not Fundamentals
In many instances, cryptocurrency is overhyped by notable figures, business owners heavily invested in digital assets or others who have an interest in profiting if prices rise. However, there are no investing fundamentals behind most cryptocurrencies.
To be fair, some bona fide businesses or other entities have created blockchain solutions. These companies may have stocks trading on a traditional exchange or over the counter. They'll also have assets like equipment, people, and intellectual property that add value. If this is the case, the blockchain solution and its tokens may have intrinsic value.
Investing in tokens backed by companies may yield better results in the long run if they have a truly useful blockchain product or service. For example, how useful is the token issued by a banana farm in Laos (funded by a token sale), with coins redeemable in Laotian bananas? Not so useful. What about a blockchain designed to decrease traditional finance transaction times and increase cross-border payments and stability? Possibly useful.
A cryptocurrency issued for the sake of being a cryptocurrency and hoping for a return is genuinely worthless.
Stubborn Stances by Investors
In many cases, the forecast may come from an "analyst" with a "permabull" stance. These forecasters may turn out to be right—anyone can plot a trend line on a graph and make a prediction. Eventually, someone will be right, and they'll be touted as the latest expert to listen to. You've likely seen a headline like "Analyst that predicted a price of XYZ and was right, now forecasts ABC!"—and some will listen.
Some might take an opposing stance, predicting that the markets will fall to a certain price. There is a chance that it will happen, and that person will be lauded as the one who knows—and again, some will listen.
Some analysts use the broken clock method—even a broken clock is right twice a day—to make predictions. At some point, they will be right.
Market Speculation
It's true that there are a significant number of cryptocurrency millionaires who made a lot of money from early cryptocurrency purchases. But this was pure speculation at that point. Even though prices are continually rising over time, like the stock market, Bitcoin and many cryptocurrencies remain speculative because they are driven by emotion and desire.
Even after the Securities and Exchange Commission approved Bitcoin Spot ETFs in January 2024, there remained no fundamentals for investors or analysts to analyze and compare. The constant factor throughout all cryptocurrency ups and downs is hope—the hope that prices go up.
Media and News
Like analysts, many media outlets want to be the ones that "were there" in the trenches with the traders and investors. Being the first to report is a big deal, so when there are whispers or speculation about a development, it is quickly disseminated to the masses.
Case in point—in October 2023, an employee at an outlet accidentally published a social media post about a Bitcoin Spot ETF, something many investors, brokerages, and financial management firms had been clamoring for. Bitcoin's price spiked more than $2,000 over several hours before dropping when fans realized it wasn't true, and the outlet released an apology.
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This is a prime example of what happens in speculative investments. Investors (in reality, those who buy and hold Bitcoin are speculators) succumb to the fear of missing out (FOMO) on an opportunity for large and quick profits.
Trading
Critical to prices is trading volume, and billions of dollars in Bitcoin are traded every day. Trading activity is guided by price speculation on the part of traders—people using bitcoins in transactions generally don't create any influence on prices because there isn't enough buying volume or enough payments being made to affect demand and supply. So, realistically, analysts use price data influenced by traders and investors to create predictions.
What Will $100 of Bitcoin Be Worth in 2030?
It is difficult to tell how much 1 BTC will be worth because its price varies so often and wildly. Between 2017 and 2023, its average price has slowly trended upward amidst large swings in both directions. So, it might go up or down—if it is even still around.
How Much Is Bitcoin Worth in US Dollars?
On March 14, 2024, Bitcoin closed at $71,371, up nearly $47,000 from March 14, 2023.
How Much Did Bitcoin Cost in 2010?
In 2010, 1 BTC was worth between $0.1 and $0.2.
The Bottom Line
Taking a step away from issues with forecasters themselves, a cryptocurrency investor should always keep in mind that the cryptocurrency industry itself is inherently challenging to analyze. There are no similar comparisons; the regulatory environment is still adapting, and the cryptocurrencies themselves, while having market value, have no intrinsic value.
All of this is to say that there should always be a healthy dose of skepticism when the latest price predictions inevitably appear.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read ourwarranty and liability disclaimerfor more info. As of the date this article was written, the author owns Bitcoin and XRP.
