Can Bitcoin Go to $500,000? It's More Likely Than You Think.

Bitcoin's (CRYPTO: BTC) price now sits at about $95,500. Could it be physically possible for the price to go all the way to $500,000?

Yes, it's possible. And yes, on a long enough timescale, it probably will happen, and you could own it during that run-up if you wanted to. Here's why this huge gain is more probable than not.

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Never underestimate the power of halvings

Understanding why it's realistic for Bitcoin's price to increase tremendously during the coming years requires understanding a key component of economics, as well as one of the peculiarities of the coin itself.

The price of Bitcoin today, like all cryptocurrencies, is determined by the equilibrium point between the push and pull of buyers and sellers on the open market. When buyers want to gain control of an asset, they will pay slightly higher than the prevailing price to ensure they win the privilege of holding rather than letting that privilege fall to others. In contrast, when sellers want to liquidate an asset, they're willing to be paid slightly less than the prevailing price just to make sure they can safely convert that portion of their investment into cash.

The other dynamic at play here is supply and demand. If there's a static amount of a coin being supplied, which in the case of Bitcoin means being mined, the price won't change so long as buyers continue to demand the same quantities of the coin and sellers continue to want to offload a roughly equal quantity in response.

Compared to the price of the coin five years ago, those buyers and sellers are trading Bitcoin today at a price that's more than 800% higher, even though its total supply in circulation increased by only about 8%.

The obvious implication of that price rise is that supply has increased much less than demand. Actually, supply has become increasingly constrained because of halvings, which reduces by half the amount of Bitcoin miners are rewarded for mining new coins. And that all happened during a period of increasing demand, hence the dramatic price increase.

What's more, halvings tend to happen roughly every four years. There will continue to be halvings until all 21 million of the possible Bitcoins have been mined out (about 19.8 million already are in circulation). But well before that, the price will fly skyward, even if demand never increases very much beyond where it is today. And that's a very appealing prospect for investors, to say the least.

The smart strategy here is obvious

Buying and holding Bitcoin for as long as you can tolerate it is the best way to capture the impact of future halvings on its price. Halvings aren't the only catalyst the coin is exposed to, either. Its blockchain gets the occasional upgrade, and its inclusion in a handful of exchange-traded funds (ETFs) deepens its integration into the traditional financial system, which may support higher prices over time.

Some estimates suggest Bitcoin's price could surpass $500,000 by mid-2026. That might be possible with the help of potential upcoming catalysts, like the possible creation of a national cryptocurrency reserve in the U.S. or similar initiatives elsewhere. But it is probably a better idea to be more patient and to have no expectation for the exact date because it doesn't really matter in the larger scheme of things.

After all, if Bitcoin gained so much value relative to what it's worth today, why would you want to sell it after its price passed some arbitrary mark like $500,000? In such a scenario, the core investment thesis would be proven true yet again, which means it would still be smarter to hold on to your coins, possibly forever, as selling would mean forgoing future gains, which could be just as substantive.

So, yes, Bitcoin will rise above $500,000 someday, even if it's hard to predict precisely when. Just make sure you've bought enough to accomplish your financial goals while prices are a bit lower if you want to get the advantage of the upside.

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Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.