bitcoin (btc-usd) is at the point where a small pullback from its previous highs can turn into a big comeback. closed last year at $47,686 per btc token, but as of July. 10, is at $20,623.
so even if the btc token rises to $41,246, or double from here, it would still be down 13.5% year to date (ytd). and if it went back up to where it was a month ago, it would go up 42.86%.
Reading: Bitcoin to doubling than
that’s just the simple math. but it also seems quite likely that this could happen. let’s see that.
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expected return for btc
we could put together a matrix of expected probabilities and scenarios related to the expected return(er) of investing in bitcoin. but just to keep things simple, let’s take two scenarios and then average them. the first is a positive scenario and the second is a less than positive outcome.
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For example, on the bright side, let’s say there’s a good chance bitcoin will double from here. and let’s assume, for simplicity, that it takes a year to occur. so let’s say there is a 60% chance it will double or increase to 100%. that makes your er 60% (that is, 0.6 x 100%).
However, let’s say that in a not-so-positive scenario there is a 40% alternative chance that the stock will go up 50%. that gives you an er of a 20% gain (ie 0.40 x 0.50).
so the combined er for the two is a 100% chance of an 80% win (ie 60%+20%). Investors can expect bitcoin to rise to $37,121, or 80% over Jul. 10 price of $20,623.
the historical probability of bitcoin doubling
the last time bitcoin doubled, it took only 75 days, according to cointelegraph. but the fastest this happened was in 2021, when it took just 22 days. grew from $21,000 to $42,000 in just three weeks and one day.
sound familiar? bitcoin is just under $21,000 now. in fact, it is already up 14% from its low of $18,084.
here’s another way to look at this. let’s look at the recent history of bitcoin.
click to enlarge
font: mark r. hake, cfa
The last time bitcoin was at this price was in late December 2020. Since then, bitcoin rose over 200% to over $63,000, then fell over 50% to just over $30,000 $ in July 2021. then proceeded to more than double to over $67,000 in November 2021. then fell almost 40% to $36,000, rose 30% to over $47,000 in April 2022 and has since dropped back more than 50% to where it is today.
In other words, bitcoin is up three times since it was last at the current price level. it went up 200%, then 100%, then 30%. therefore, the average gain was 110% when increased.
tuning expected performance
That makes the probability of bitcoin going up to 100%, or doubling from here, extremely likely. in fact i would say the probability is much higher than 60% as in my positive scenario above. it’s more like 80% of a 110% increase, with only a 20% chance of rain, only 50% more.
which makes the total expected return equal to 98%. This can be seen by doing this calculation: (80% x 110% = 88%) + (50% x 20% = 10%). so, 88% +10% = 98% (that is, a double).
in other words expect bitcoin to double from here to $41,000 per btc token. And if history is any guide, it probably won’t take even close to a year to happen.
As of the date of publication, mark hake did not hold (either directly or indirectly) any position in the securities mentioned in this article. Opinions expressed in this article are those of the writer, subject to investorplace.com’s posting guidelines.
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