At current prices of BTC ($43,350) and ETH ($3,080), that would mean a nearly five-time and four-time increase in price, respectively.
The “Digital Assets in A Post-Cycle World” report explained several factors that are likely to combine to drive prices to those heights by the end of the year. Compared to other cycles, it would appear that BTC has not achieved what the report calls “overly frothy valuations.” This could be attributed to better efficiency in the market or a transition from a payments solution to a store-of-value.
The lack of bubble-like prices is shown by the fact that since the May 2020 Bitcoin halving, BTC’s market capitalization peaked at an increase of just 3.7x. This is the lowest increase since the 2016 halving when the market cap peaked at an increase of 4.2x.
The halving is when the mining reward issued per block is reduced by half, decreasing the new supply coming onto the market. The 2020 halving saw block rewards go down to 6.25 BTC per block.
Supply-side dynamics are also seen as a bullish signal by FSInsight. The illiquid supply of BTC — Bitcoin that has found a long-term home in storage — accounts for about 75% of the circulating supply. The report states:
“The current supply dynamics can best be described as a powder keg. The question remains who lights the match.”
This observation tallies neatly with the Monday video from the InvestAnswers YouTube channel. Host James Mullarney said that due to the current lack of sellers, a “buy between 100,000 and 200,000 Bitcoin within the space of one or two weeks” could send the price up 3x.
The FSInsight report also notes that the market value to realized value (MVRV) of BTC is at the lowest level since April 2020, when its price was still below $10,000. From that point, BTC’s price climbed steadily up over the next year to a high of about $57,000 in May 2021.
Ultimately, the report forecasts BTC’s price to reach a range of $138,000–$222,000 by the end of 2022.
The case for ETH
The bullish forecast for ETH began by showing how Ethereum generated nearly $10 billion in fees in 2021. According to the report, that is a 1,564% annual growth rate from 2020.
The ETH supply-side dynamics also spell bullish signals for the analysts, who noted that the burn mechanism from the implementation of Ethereum Improvement Proposal 1559 creates “disinflationary pressure” but added:
“While we do not necessarily believe this to make ETH ‘sound’ money, it is certainly beneficial for price.”
FSInsight analysts conclude that ETH is “remarkably undervalued.” Analysts factored in the merge, Ethereum’s transition to a proof-of-stake consensus, layer-2 platform development, and the potential launch of exchange-traded funds, to forecast a price of $12,000 by the end of 2022.