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Bitcoin Has a High Historical Probability of Doubling From Here

  • Bitcoin (BTC-USD) is off 56.98% year-to-date and down 30% in the last 30 days as of Jul. 10.
  • That implies that if it were to rise back to where it was a month ago, it would be up 42.86%.
  • And even if was down 13.5% YTD, it will still be double from here.
Bitcoin - Bitcoin Has a High Historical Probability of Doubling From Here

Source: Sittipong Phokawattana / Shutterstock.com

Bitcoin (BTC-USD) is at the point where a small retracement of its previous highs can turn into a giant return. It closed last year at $47,686 per BTC token, but as of Jul. 10, it’s at $20,623.

So, even if the BTC token rises to $41,246, or a double from here, it would still be down 13.5% year-to-date (YTD). And if it were to rise back to where it was a month ago, it would be up 42.86%.

That’s just the simple math. But it also seems fairly probable that this could happen. Let’s look at that.

Ticker Company Price
BIT-USD Bitcoin $20,526.44

Expected Return for BTC

We could put together a matrix of expected probabilities and the related expected return (ER) scenarios of investing in Bitcoin. But just to simplify things, let’s take two scenarios and then average them. The first is a positive scenario and the second is a less-than-positive outcome.

For example, on the bright side, let’s say there is a good possibility that Bitcoin could double from here. And let’s just assume for simplicity’s sake that it takes a year to occur. So, let’s say there is a 60% chance it will double, or rise 100%. That makes its ER 60% (i.e., 0.6 x 100%).

However, let’s say in a not-so-positive scenario that there is an alternative 40% chance the stock will rise 50%. That gives it an ER of a 20% gain (i.e., 0.40 x0.50).

Therefore, the combined ER for the two is a 100% probability of an 80% gain (i.e., 60% +20%). Investors can expect that Bitcoin will rise to $37,121, i.e., 80% over the Jul. 10 price of $20,623.

The Historic Probability of Bitcoin Doubling

The last time Bitcoin doubled, it took only 75 days, according to CoinTelegraph. But the fastest this ever occurred was in 2021, when it took just 22 days. It rose from $21,000 to $42,000 in just three weeks and one day.

Does that sound familiar? Bitcoin is just below $21,000 now. In fact, it is already up 14% from its lows of $18,084.

Here is another way to look at this. Let’s look at Bitcoin’s recent history.

7-10-22 - Bitcoin - History - Mark R. Hake, CFA
Click to Enlarge
Source: Mark R. Hake, CFA

The last time Bitcoin was at this price was in late December 2020. Since then, Bitcoin rose over 200% to above $63,000, then fell over 50% to just above $30,000 in July 2021. It then proceeded to more than double to over $67,00o in November 2021. Next, it fell almost 40% to $36,000, popped up 30% to over $47,000 in April 2022 and since then has slid over 50% again to where it is today.

In other words, there have been three times Bitcoin has risen since it was last at today’s price level. It rose 200%, then 100%, then 30%. Therefore, the average gain was 110% when it rose.

Adjusting the Expected Return

That makes the probability that Bitcoin will rise 100%, or double from here, extremely likely. In fact, I would argue the probability is much greater than 60% as in my positive scenario above. It’s more like 80% of a 110% gain, with just a 20% chance of rain — up just 50%.

That makes the total expected return equal to 98%. That is seen by doing this calculation: (80% x 110% = 88%) + (50% x 20% = 10%). So, 88% +10% = 98% (i.e., 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 anywhere near a year to occur.

On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com, Newsbreak.com and Beehiiv.com.

Article printed from InvestorPlace Media, https://investorplace.com/2022/07/bitcoin-can-double-from-here-from-an-expected-return-standpoint/.

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