We expect the next 10 years to be a strong decade for Bitcoin, driven by the combined effect of three factors: (1) Bitcoin's continued rise as an institutional asset, which should generate sustained net inflows over time; (2) growing demand from institutional investors for exposure to hard assets as a hedge against inflation risk; and (3) Bitcoin's extremely limited and inelastic new supply.
We forecast Bitcoin to be the best-performing institutional asset over the next decade, with its price rising to $1.3 million by 2035 (a 10-year forward compound annual growth rate of 28.3%). These returns will be accompanied by significant volatility, although this volatility will be lower than historical averages.
We believe Bitcoin will continue to exhibit low correlation with stocks, bonds, and all other major asset classes. We believe Bitcoin's historical "four-year cycle" no longer holds true, though we caution that significant drawdowns are still possible. The greatest risks to our forecast arise from regulatory and legislative risks arising from a changing political environment, as well as risks inherent to Bitcoin as a relatively new asset with a limited track record. Other risks, including technological disruption related to quantum computing, have received less attention but are still worth mentioning. Models predicting Bitcoin's future returns are imperfect, relatively new, still evolving, and rely on limited data. Therefore, we strive to be conservative. We believe this is appropriate for a new and volatile asset. The Big Picture: Over the past 16 years, Bitcoin has grown from an unproven concept to a $2.4 trillion asset, increasingly owned by some of the world's most respected investors. This has been the most challenging step in its growth process—the famous "0 to 1 moment," to borrow Peter Thiel's term. We believe the next decade will witness Bitcoin's "1 to 100" moment.
Bitcoin is first and foremost a macroeconomic asset. Therefore, macroeconomic conditions are critical to our long-term capital market assumptions.
Specifically, Bitcoin is often viewed as a digital store of value, or "digital gold." While it has many other uses—and we expect certain payment-related uses to gain traction over the next decade—its role as "digital gold" is central to its investment thesis.
In this regard, the most important macroeconomic factors to consider are those related to debt, deficits, and fiat currency devaluation, as well as the US dollar's role as the world's dominant reserve currency, as these factors play a role in institutional demand for gold-like assets.
We believe these macroeconomic trends are easily forecastable. Specifically, we expect major countries, including the United States, to continue accumulating debt at an accelerating rate, and that rising debt burdens will place increasing pressure on these economies. As economist Lyn Alden put it, "Nothing can stop this train."
Over the next decade, we expect the government to respond to its growing debt burden by devaluing its currency. As legendary hedge fund investor Ray Dalio wrote in June 2025:
"When a nation's debt is excessive, lowering interest rates and devaluing the currency in which the debt is denominated are the most likely first paths government policymakers will take, so it's worth betting on it happening."
The United States is approaching its 250th anniversary, a milestone worth reflecting on. Here are five striking facts about US debt 250 years later:
1 / In its first 200 years, the United States accumulated $650 billion in debt. Today, that figure is $36.2 trillion.
2 / Half of all US debt was accumulated in the past 10 years.
03 / U.S. debt now exceeds $100,000 per capita.
04 / U.S. debt accounts for 120% of GDP.
05 / Annual interest payments on the U.S. debt are $952 billion, making it the fourth-largest spending item in the U.S. budget.
Total U.S. Federal Debt (in trillions of U.S. dollars)
Source: Bitwise Asset Management, data from the U.S. Treasury Department, data dated January 1, 1966, to March 31, 2025. 1.2 DOGE: Much ado about nothing Current government spending is making the situation worse. The Congressional Budget Office projects the US deficit will increase by $1.9 trillion this year. This is shocking to many, as the current US administration was elected on a promise to reduce government spending. In early 2025, President Trump appointed Elon Musk to lead a new entity called the Department of Government Efficiency (DOGE), which pledged to cut $2 trillion in government spending. Meanwhile, in Congress, deficit hawks talked about reducing the US annual deficit from its current level (over 6% of GDP) to 3% or less. None of this happened. Less than six months later, Musk left the administration, DOGE cuts had little effect, and US government spending reached a record high. If one of the world's leading entrepreneurs—and an iconoclastic president unafraid to shake up the system—can't even slightly slow spending, we doubt anything else can. Cumulative total spending since Trump's inauguration compared to the same period in 2023 and 2024 (in trillions of U.S. dollars) Source: The Wall Street Journal and Treasury Department. Data as of April 11, 2025. Note: The first day of the year 2025 is January 20; the dates in 2023 and 2024 align with the day of the week in 2025 and account for leap years. 1.3 Growing Demand for Insurance We do not believe the United States is approaching hyperinflation or other doomsday scenarios. Instead, we share the concerns expressed by numerous leaders—including institutions like JPMorgan Chase and BlackRock, as well as several former U.S. budget directors and chief economists—that the path of rising debt and deficits is concerning and will erode the purchasing power of the dollar over time.
These trends, in turn, are likely to increase demand for non-fiat hedges like gold and Bitcoin. The recent performance of these hedges—both have outperformed all other major assets since 2020—suggests that investors are prepared for this changing world.
We don't need to see catastrophic hyperinflation for the value of inflation hedges to rise significantly. This view is reflected in our price forecast.
Bitcoin's performance against major asset classes since 2020
Source: Bitwise Asset Management, data from Bloomberg. Data date: January 1, 2020, to June 30, 2025.
Asset classes are represented by the following: Bitcoin: Bitcoin spot price. Commodities: Deutsche Bank DBIQ Optimum Yield Diversified Commodity Index Total Return. Gold: Gold spot price. Hedge Funds: Bloomberg Macro Hedge Fund Index. Private Credit: Indxx Private Credit Index. Private Equity: S&P Listed Private Equity Total Return Index. Real Estate: MSCI US REIT Total Return Index. US Bonds: Bloomberg US Aggregate Bond Index. US Equities: S&P 500 Total Return Index. 1.4 Reserve Assets, Central Bank Purchases, and the Changing Global Order Another key macroeconomic trend to watch over the next decade is the dollar's evolving role as the world's leading reserve currency. Data suggests the dollar's dominance is weakening. This trend is reflected in the dollar's declining share of global central bank reserves, the US's declining share of global GDP, and recent central bank purchases of alternative assets (primarily gold). We are not advocating that the dollar will inevitably lose its role as the world's leading reserve currency. Rather, the data suggests its dominance is declining over time, creating space for alternative assets and currencies to play a larger role. We believe Bitcoin has a strong chance of securing a place in this alternative asset landscape over the next decade. Over a dozen countries, including the United States, now hold Bitcoin, and this number has increased over the past year. Because Bitcoin is more functional than gold in some respects (easier to store, transport, and verify), it could, over time, compete with gold as one of the preferred hard assets held by central banks and governments. As the world moves toward a more complex, multipolar future, we believe multiple global reserve assets will emerge. We believe Bitcoin has a strong chance of becoming one of these assets, a view reflected in our long-term price forecast. US Dollar's Share of Global Foreign Exchange Reserves Source: Bitwise Asset Management, using data from the International Monetary Fund (IMF). Data as of December 2024. Source: Bitwise Asset Management, data from the World Bank. Data as of December 31, 2024. Central Bank Net Gold Purchases (tons) Data as of December 31, 2024. 1.5 Regulatory Hypothesis The global regulatory outlook for crypto has improved significantly over the past year. The primary catalyst is the 2024 US election, which replaces an actively anti-crypto administration with one openly supportive of crypto, as reflected in leadership changes at key agencies such as the Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency (OCC), the Commodity Futures Trading Commission (CFTC), and the US Treasury. However, this trend is not limited to the US. Positive developments are also occurring in multiple regions, including the Middle East, China, the UK, and elsewhere, albeit at varying paces. The core question investors should ask about regulation is whether the recent positive trend is a long-term secular trend or a temporary partisan swing. In other words, will the pro-crypto trend persist regardless of future election outcomes? We believe the answer is yes. In the US, crypto is one of the few policy issues that enjoys bipartisan support. Consider the GENIUS Act, which provides a regulatory framework for stablecoins. It passed the Senate by a margin of 68 to 30, with 18 Democrats voting in favor. It also passed the House of Representatives by a similarly wide margin (308 to 122). It's worth considering the rarity of this bipartisan vote: the GENIUS Act was only the third bill to reach the critical 60-vote threshold during the 2025 congressional session. There are many reasons for crypto's bipartisan support, including its widespread popularity among young voters. But perhaps the most important explanation is that the US financial industry—traditionally a significant donor to the Democratic Party—supported the measure because it is eager to capitalize on the growth and profit opportunities offered by crypto. This profit motive is at the heart of our belief that crypto regulation will evolve in a positive direction: as a wider range of investors and companies engage with crypto, it becomes increasingly difficult for politicians to unite against it. Today, nearly every major financial institution in the United States has launched significant crypto initiatives. If BlackRock, JPMorgan, and Morgan Stanley are all heavily invested in crypto—along with thousands of American companies and millions of Americans—it's hard to imagine politicians reversing course.
The same is true globally, with many countries feeling the need to compete in this emerging space.
Our view is that you can't put the genie back in the bottle: crypto has already entered the mainstream. That's why we believe the overall path of crypto regulation over the next decade will be positive.
Institutional Crypto Adoption
Source: Bitwise Asset Management, data from company filings and public statements. Data as of June 30, 2025.
We believe Bitcoin will be the world's best-performing major asset over the next decade, achieving a compound annual growth rate (CAGR) of 28.3%.
Our thesis is driven by three primary factors.
01 / Institutional Demand
Bitcoin is rare among assets in that retail investors have spearheaded its emergence. In contrast, most emerging assets—private equity, private credit, and so on—are initially adopted primarily by institutional investors, with retail investors only developing interest later in their development.
Combined with Bitcoin's strict scarcity (only 21 million Bitcoins will ever exist), Bitcoin's retail-first nature creates a unique situation: nearly 95% of all Bitcoins that will ever exist are already owned—primarily by retail investors—while most institutional investors have a 0% allocation.
In recent years, institutional investors of all types have begun allocating increasingly large amounts of Bitcoin. Because only a small amount of new Bitcoin is produced each year (approximately $18 billion at current prices), these investors are forced to purchase Bitcoin from existing investors. The World Bank estimates that institutional investors control approximately $100 trillion in total assets. Over the next decade, we believe these investors will allocate 1% to 5% of their portfolios to Bitcoin, meaning they will need to purchase between $1 trillion and $5 trillion in Bitcoin. This has already begun: Bitcoin ETPs currently hold $170 billion in assets. But this represents only a small down payment on the total investment required. We believe this growing buying pressure will create sustained, long-term demand for Bitcoin, driving up prices. As mentioned above, Bitcoin's supply is strictly limited: there will only ever be 21 million Bitcoins. Furthermore, the vast majority of Bitcoins are already owned, with 19.9 million (94.6%) currently in circulation.
Bitcoin's annual inflation rate is just 0.8%, falling to 0.4% in 2028 and 0.2% in 2032 (based on a scheduled issuance schedule that halves new issuance every four years). In comparison, the annual inflation rate of gold's supply fluctuates between 1% and 2%.
Importantly, Bitcoin's supply is inelastic: any change in demand for Bitcoin or its price does not lead to the production of more Bitcoin, unlike gold, oil, or other major commodities.
The collision of massive institutional demand with limited, inelastic supply provides a simple economics-driven rationale for our argument.
03 / Growing Concerns about Fiat Currency Debasement
The backdrop of growing institutional demand comes amidst growing global concerns about debt, deficits, and fiat currency debasement, which has led to a scramble for alternative exposure to fiat currency risk. As legendary hedge fund investor Paul Tudor Jones wrote in a 2020 article titled "The Great Monetary Inflation," which advocated buying a basket of hard assets: "The best profit-maximizing strategy is to own the fastest horse. If I were forced to predict, my bet would be Bitcoin." The U.S. federal debt has increased by $13.0 trillion over the past five years, currently standing at $36.2 trillion. Annual interest payments on this debt now stand at $952 billion, making it the fourth-largest spending item in the U.S. budget. To make matters worse, interest rates now exceed projected GDP growth, making it more difficult to mitigate future debt growth. The combination of these three factors—institutional demand, limited supply, and growing concerns about fiat currency debasement—has positioned Bitcoin investors to benefit as it captures a growing share of the store of value market, and that market expands in size. Market Valuation Forecasting Models for predicting Bitcoin's future value are relatively new and still evolving. Academic literature is limited, and there is no consensus on the best approach. Our preferred long-term valuation model is the Total Addressable Market (TAM) model, which seeks to estimate the future size of the markets Bitcoin can serve and its projected future penetration within those markets. Given Bitcoin's fixed, long-term supply, this model enables us to estimate the asset's future value. Bitwise Bitcoin Valuation Model We believe Bitcoin is well-positioned to compete in multiple markets. This includes non-sovereign stores of value like gold, as well as corporate treasuries, national treasury reserves, and others. The table below provides context, highlighting the projected size of each market in 2035 and our expectation that Bitcoin will have penetrated that market by then, using bear, baseline, and bull case scenarios. To be conservative, we use Bitcoin's long-term total supply of 21 million when calculating future prices at different penetration rates, even though not all of this supply will be in circulation in 2035 (and a significant portion is assumed to be lost). A key input to the model is our forecast for the size of each market category in 2035. In most cases, we arrive at our estimates by examining the historical growth rate of the asset class over the past decade and then extending that growth rate forward into the next decade. It's worth noting that even relatively slow growth rates can compound significantly over a decade. For example, we project institutional investment assets to nearly double in size, despite a relatively modest historical compound annual growth rate of 5.6%. Readers may also notice that the store of value market grows significantly in our model, from $29 trillion to $92 trillion. This reflects a continuation of that market's growth rate over the next decade. We believe this estimate is likely conservative, given our expectation of heightened concerns about fiat currency debasement (and therefore increased interest in fiat hedging instruments) over the next decade. We couldn't find accurate historical estimates of the size of the offshore wealth market. Therefore, we applied a simple 3.0% compound annual growth rate to this market. For the purposes of our long-term capital market assumptions, we rely on a baseline scenario, which we believe is the most likely outcome. We include both bear and bull market scenarios to reflect market uncertainty. Bitwise's Bitcoin Valuation Framework. Source: Bitwise Asset Management, with data from Bloomberg, IMF, World Bank, BCG, APMEX, Carfang Group, and EU Tax Observatory. Bitcoin prices as of June 30, 2025. Current market sizes are based on different cutoff dates, resulting in different CAGR timeframes through 2035. The Bitcoin valuation framework and price targets are for illustrative purposes only and are not predictions of future results. This material represents an assessment of market conditions at a specific time and is not intended to predict future events or guarantee future outcomes. Our baseline scenario projects a value of $1,306,740 per Bitcoin in 2035, representing a 28.3% compound annual growth rate from current levels. This represents a significant decrease from the previous 10-year and 5-year CAGRs of 82.5% and 63.8%, respectively, but remains high compared to Wall Street's forecasts for traditional assets such as stocks, bonds, real estate, and other assets. We note that our forecast is relatively close to estimates by other leading crypto analysts, including Alliance Bernstein (which predicts Bitcoin will exceed $1 million by 2033) and Standard Chartered (which predicts Bitcoin will exceed $500,000 by 2028). Our forecast is more conservative than those of ARK Invest ($1.5 million to $2.5 million by 2030) and Strategy ($21 million by 2046). For additional perspectives, we review other widely cited Bitcoin valuation models in the appendix.
Why is Bitcoin valuable?
A question critics often ask about Bitcoin is: Why does it have any value? After all, Bitcoin doesn't generate cash flow.
We believe the answer is simple.
We view Bitcoin as providing a service: the ability to store wealth in a digital format, without relying on banks or governments. The more people want this service, the more valuable Bitcoin becomes. The fewer people want this service, the less valuable Bitcoin becomes. If no one wants this service, Bitcoin's value is zero.
This is no different from any other service.
The difference lies in how value accrues. With traditional software providers, users who want their service pay an annual subscription fee to the company. With Bitcoin, you can't pay a subscription fee. After all, there's no "Bitcoin company." Instead, the only way to get the service is to buy Bitcoin. If you buy Bitcoin, you get the service—the ability to store wealth in a digital format, without the need for a bank.
Now, more and more people want Bitcoin's service. That's why it has been the best-performing asset of the past decade. We believe more people will need this service in the future as Bitcoin matures and demand for non-fiat assets grows. We are optimistic about the implications for Bitcoin's future price. 2.2 Correlation Hypothesis Bitcoin has a very low long-term correlation with other major assets. Over the past 10 years, its average correlation with various asset classes has been: Source: Bitwise Asset Management, data from Bloomberg. Data dated June 30, 2015, to June 30, 2025. Asset classes are represented by the following: Bitcoin: Bitcoin spot price. Commodities: Deutsche Bank DBIQ Optimum Yield Diversified Commodity Index Total Return. Gold: Gold Spot Price. Hedge Funds: Bloomberg Macro Hedge Fund Index. Private Credit: Indxx Private Credit Index. Private Equity: S&P Listed Private Equity Total Return Index. Real Estate: MSCI U.S. REIT Total Return Index. U.S. Bonds: Bloomberg U.S. Aggregate Bond Index. U.S. Equities: S&P 500 Total Return Index. Most observers consider any correlation below 0.50 to be "low." A closer look at how this correlation has changed over time is revealing. The chart below shows Bitcoin's 90-day rolling correlation with U.S. equities since trading began. It shows that Bitcoin's correlation with U.S. equities has almost never exceeded 0.50. In fact, despite its label as a risky asset, its 90-day correlation with U.S. equities has never reached a "high" level (i.e., above 0.75). This fact is surprising, given that media reports frequently describe Bitcoin as a "risky asset" with "high correlation with equities." Some even consider it a "high-beta tech investment." These perceptions stem from the fact that Bitcoin can be highly correlated with stocks during brief, sharp negative declines, which is precisely when the media tends to write stories about Bitcoin and correlation. Consider this: If you filter out days over the past decade when US stocks fell by 20% or more in value, Bitcoin fell an average of 2.6% on those days. But it has also historically rebounded faster and farther than the stock market, which explains its low long-term correlation. This gap between consensus opinion and data-driven reality in terms of correlation presents an opportunity for portfolio builders. Correlation with Other Assets Since its inception, Bitcoin has had a correlation of approximately 0.00 with bonds, as shown in the chart below. This is both intuitive and powerful. Intuitive because Bitcoin is driven by different factors than bonds (more on this below). But powerful because it means that when Bitcoin is mixed with bonds in a portfolio, it provides a potential diversification tool. Bitcoin also exhibits low correlation with broad commodity, real estate, private equity, and private credit indices. In other words, Bitcoin stands alone. Bitcoin's correlation with US bonds (90-day rolling) Source: Bitwise Asset Management, data from Bloomberg, July 19, 2010, to June 30, 2025. US bonds are represented by the Bloomberg US Aggregate Bond Index. Note: Correlations between -0.5 and 0.5 are traditionally defined as "low" or "no" correlation. Bitcoin and Commodities Correlation (90-Day Rolling) Source: Bitwise Asset Management, data from Bloomberg, July 19, 2010, to June 30, 2025. Commodities are represented by the Deutsche Bank DBIQ Optimum Yield Diversified Commodity Index Total Return. Note: Correlations between -0.5 and 0.5 are traditionally defined as "low" or "no" correlation. Source: Bitwise Asset Management, data from Bloomberg, July 17, 2010, to June 30, 2025. US equities are represented by the S&P 500 Total Return Index. Note: Correlations between -0.5 and 0.5 are traditionally defined as “low” or “no” correlation.
Bitcoin’s correlation with gold (90-day rolling)
Bitcoin’s correlation with private credit (90-day rolling)
Source: Bitwise Asset Source: Bitwise Asset Management, data from Bloomberg, data from September 2, 2013, to June 30, 2025. Private credit is represented by the Indxx Private Credit Index.
Note: Correlations between -0.5 and 0.5 are traditionally defined as "low" or "no" correlation.
Correlation between Bitcoin and Private Equity (90-day rolling)
Source: Bitwise Asset Management, data from Bloomberg, data from July 19, 2010, to June 30, 2025. Private equity is represented by the S&P Listed Private Equity Total Return Index. Note: Correlations between -0.5 and 0.5 are traditionally defined as "low" or "no" correlation. Bitcoin and Real Estate Correlation (90-day rolling) Source: Bitwise Asset Management, data from Bloomberg, July 19, 2010, to June 30, 2025. Real estate is represented by the MSCI US REIT Total Return Index. Note: Correlations between -0.5 and 0.5 are traditionally defined as "low" or "no" correlation. Drivers of Bitcoin's Low Correlation with Other Assets We believe Bitcoin has a low long-term correlation with stocks and bonds for two reasons. 1. A One-Time Secular Trend First, Bitcoin is undergoing a one-time maturation process, transitioning from an unfamiliar, unproven niche asset to a widely held alternative. This transition involves millions of investors investing in Bitcoin for the first time, providing asymmetric, skewed inflows, unlike the two-way flows that affect most other mature assets. This effect may diminish over time, but it is an important driver of Bitcoin's unique return characteristics. 2. Different Drivers Bitcoin is driven by different factors than stocks, bonds, and other assets. While stocks and bonds are driven by economic growth, tax rates, geopolitical developments, and technological progress, Bitcoin is driven by factors such as adoption, regulatory progress, and concerns about the debasement of fiat currencies. While there is overlap—for example, all assets are influenced by monetary and fiscal factors—you would generally expect Bitcoin's returns to differ from those of stocks and bonds given the differences in their performance drivers. We believe both of these factors will persist in the future. Therefore, we expect Bitcoin's correlation with stocks and bonds to generally remain in the low range of 0.00 to 0.50 over the next decade. We note that Bitcoin's correlation with stocks has increased in the post-COVID-19 era, which we attribute to the growing influence of monetary and fiscal policy on stocks and bonds. Because we expect this trend to persist to some extent, we use a tiered weighting approach to weight the influence of recent correlation trends in our correlation forecasts. Using this approach, we project an average correlation of 0.39 between Bitcoin and US equities over the next 10 years. Using the same approach, we project correlations with commodities of 0.07, gold of 0.07, hedge funds of 0.32, private credit of 0.27, private equity of 0.36, real estate of 0.27, and US bonds of 0.00. 2.3 Volatility Assumptions Bitcoin's volatility has been declining over the past decade—as has the volatility of its volatility. In the figure below, this is illustrated by the downward trajectory of volatility and its tighter banding over time. Bitcoin's Historical Volatility Source: Bitwise Asset Management. Data date: January 1, 2013, to June 30, 2025. We believe these trends reflect the fundamental de-risking of Bitcoin as an investment over the past decade and the diversification of its investor base. We expect both trends to continue over the next decade, and therefore Bitcoin's volatility (and its second-order volatility) will also continue to decline. However, our model assumes that Bitcoin's volatility will decline 50% slower than the historical trend. This reflects our view that some of Bitcoin's most fundamental challenges have been significantly mitigated, including those related to regulation, adoption, custody, and liquidity. With less risk to eliminate in the market, it's reasonable to expect a slower decline in Bitcoin's volatility. A Historical Analogy: Gold Investors who question the long-term downward trend in Bitcoin's volatility can use gold as a useful historical analogy. Investors perceive gold as an asset that has existed for thousands of years, but in reality, it has only had a fluctuating price for about 50 years in the modern era. For most of the United States' existence, gold's dollar value was generally fixed, and politicians didn't formally break the gold-dollar peg until 1971. A chart of gold's price action following this break is instructive. Initially, gold's volatility surged to unusually high levels as investors grappled with its role after the decoupling. As investors gradually accepted its new role in the world, volatility generally declined over the next 26 years, bottoming out in 1997. Gold's Historical Volatility Source: Bitwise Asset Management, data from Bloomberg. Data dated January 2, 1975, to June 30, 2025. Importantly, gold's volatility did not fall to zero; in fact, it rebounded in the late 1990s and surged during the 2008 financial crisis. These surges reflected shifting fundamentals in the gold market. Today, its volatility is typically slightly lower than that of US stocks and slightly higher than that of US bonds. We expect a similar long-term outcome for Bitcoin. It is currently establishing its global presence, which is driving a one-time decline in its volatility. Eventually, we expect it to reach a stable state with average volatility similar to that of gold.
For modeling purposes, we position Bitcoin's future volatility at the midpoint of its projected journey from 2025 to 2035. This places it at 32.85%. In fact, we expect near-term volatility to exceed Bitcoin's volatility in the coming years as the market matures.
Bitcoin has historically operated in four-year cycles, with three notable "up" years followed by a sharp correction year. If the four-year cycle repeats, 2026 will be a correction year. Bitcoin's Performance: A Four-Year Cycle Source: Bitwise Asset Management. Data date: December 31, 2010, to June 30, 2025. Note: The designation given to the four-year cycle represents our assessment of the forces that have most contributed to Bitcoin's performance during this period. Performance information is provided for informational purposes only. Returns reflect the returns of Bitcoin itself, not those of any fund or account, and are exclusive of any fees. Back-tested performance is not an indicator of future performance of any investment strategy. Future crypto cycles may not be four years; the four-year increments are based on historical data for illustrative purposes and are not a prediction of future results. This material represents an assessment of market conditions at a specific time and is not intended to predict future events or guarantee future outcomes. There is no consensus on what drives this remarkable pattern. Below, we discuss four leading theories. Every four years, the number of newly minted Bitcoins is cut in half. While the dates of the halvings don't exactly coincide with the start or end of Bitcoin's price cycles, many attribute the cycles to the long-term effects of this supply reduction. Previous years of decline (2018, 2022) coincided with periods of rapid interest rate hikes by the U.S. Federal Reserve. Many believe these interest rate shocks contributed to Bitcoin's sharp correction. Some researchers attribute the four-year cycle to a classic boom-and-bust economic cycle: novel innovations generate new investment and strong returns, which in turn attract leverage and bad actors until the price resets. In the case of Bitcoin, each pullback has been accompanied by a crash: the Mt. Gox collapse in 2014, the SEC's crackdown on fraudulent ICOs in 2018, and the FTX crash in 2022. 04 / Chance Some observers believe the four-year cycle is accidental, noting that it has only occurred three times. At Bitwise, we suspect there's some truth in all four arguments. Regardless, we believe the four-year cycle is unlikely to repeat in the future for the following reasons. First, regardless of which explanation you consider, the influence of these forces (besides chance) has diminished. For example, each subsequent Bitcoin halving reduces supply by half the previous one, resulting in a smaller impact. Interest rates are unlikely to rise significantly in the near future; instead, most experts are calling for rate cuts. Similarly, leverage in crypto is relatively contained (currently—a concern), so the boom-and-bust cycle effect may be less pronounced than in historical periods. We would also add that improved regulation reduces the likelihood of crashes like those seen during the 2014, 2018, and 2022 pullbacks. Second, we believe the wave of institutional capital entering the space (officially beginning with the approval of the spot Bitcoin ETP in 2024) will persist for many years, in part because a significant portion of the institutional market remains untapped. This will provide sustained upward pressure on Bitcoin prices, inconsistent with historical four-year cycles. Third, we believe the pro-crypto regulatory shift beginning with the 2024 election will similarly create a multi-year tailwind that spans historical four-year cycles. We still expect market volatility and significant Bitcoin price pullbacks. However, we do not expect the classic four-year cycle to hold true going forward. Third, we believe that Bitcoin vs. Traditional Assets Long-term capital market assumptions are useful for investors because they help design effective portfolios. Therefore, it is important to consider not only the long-term outlook for Bitcoin but also the relative outlook for other asset classes. To do this for non-crypto assets, we took a simple average of the latest long-term capital market assumptions from four leading financial institutions: JPMorgan Chase, PIMCO, BlackRock, and Vanguard. It's worth noting that each provider uses a different timeframe (between five and ten years) for their assumptions, and they use different target indices to model asset class returns. For the purposes of creating the average forecast, we ignore these differences. Therefore, the chart below should be viewed as an approximate average rather than a precise herd forecast. Not surprisingly, the results show Bitcoin as both the best-performing and most volatile major asset, with low correlation to other assets. This is consistent with its historical performance and the likely outcome we predict. Source: Bitwise Asset Management. Bitcoin return and volatility forecasts are provided by Bitwise. Forecasts for other asset classes are an average of estimates from JPMorgan, PIMCO, BlackRock, and Vanguard Capital Markets reports, which may be based on different indices and date ranges. For correlations, asset classes are represented by the following: Bitcoin: Bitcoin spot price. Commodities: Deutsche Bank DBIQ Optimum Yield Diversified Commodity Index Total Return. Gold: Gold spot price. Hedge Funds: Bloomberg Macro Hedge Fund Index. Private Credit: Indxx Private Credit Index. Private Equity: S&P Listed Private Equity Total Return Index. Real Estate: MSCI U.S. REIT Total Return Index. U.S. Bonds: Bloomberg U.S. Aggregate Bond Index. U.S. Equities: S&P 500 Total Return Index.
Note: Correlations between -0.5 and 0.5 are traditionally defined as "low" or "no" correlation.
Bitcoin is a volatile asset with a limited historical record. Regulations surrounding Bitcoin are rapidly evolving, institutional adoption is still in its early stages, and the underlying technology supporting Bitcoin is relatively new. Furthermore, these and other factors make predicting Bitcoin's future returns, correlations, and volatility inherently uncertain and subject to significant risk and potential error.
The following is one of the key risks to consider.
Bitcoin was developed in 2008-09 and began trading widely on public exchanges in 2010. The first institutional investment product offering exposure to Bitcoin launched in 2014, while a spot ETP tied to Bitcoin wasn't launched until 2024. As a result of these relatively short time periods, there is limited data available for evaluation when forecasting Bitcoin's future returns, correlation, and volatility. Given the constantly evolving nature of Bitcoin's market, regulatory, and other developments, future returns may not bear a strong resemblance to past returns, presenting an additional risk. Analysts studying Bitcoin's historical returns can only examine returns under the macroeconomic conditions that existed since its launch, and future macroeconomic conditions may differ from those of the past. Due to Bitcoin's limited track record, investors should carefully consider Bitcoin forecasts that rely heavily on historical data. While we have attempted to account for these risks in our analysis, they remain. The regulatory and legislative environment surrounding Bitcoin is newer and less developed than that of many other assets and is rapidly evolving, both in the United States and abroad. Significant and unexpected changes in Bitcoin's regulatory and legislative status in the United States or internationally could significantly alter the outlook for Bitcoin, either positively or negatively. 03 / Bitcoin Adoption by Institutions, Corporations, and Governments is a New Trend Bitcoin was initially an asset primarily dominated by retail investors. In recent years, institutions, corporations, and governments have begun acquiring Bitcoin, and its future growth prospects depend largely on continued adoption by these investor groups. However, this is a relatively new development, and whether the recent adoption trend will continue into the future is uncertain. 04 / Technology and Quantum Risk Bitcoin is a technology, and all technology carries risks. For the Bitcoin blockchain to function effectively, its underlying source code must be continuously updated as the surrounding technological landscape evolves. There is a risk that Bitcoin will not keep pace, and if it fails to do so, it will face technological or competitive challenges. For example, if quantum computing (a technology designed to process at rates exponentially higher than today's supercomputers) rapidly advances, the core technology behind Bitcoin and many Bitcoin wallets could be at risk. At some point in the future, the Bitcoin blockchain may have to undergo a major upgrade, transitioning to quantum-resistant cryptography to mitigate risks in this area. Even if Bitcoin successfully completes this upgrade—which is uncertain—individual wallets could be at risk if they don't move their assets to quantum-resistant addresses. Failure to adequately adapt to advances in quantum computing could put the Bitcoin blockchain and Bitcoin investments at risk. 05 / Other Risks Bitcoin is subject to numerous other significant risks, including those related to macroeconomic developments, trading, custody, and other factors. This document does not attempt to define all risks associated with Bitcoin, but rather to highlight specific risks that could introduce uncertainty into our capital markets assumptions. V. Conclusion In its brief 16-year history, Bitcoin has transformed from a little-known fringe investment into a $2.4 trillion asset held and studied by some of the world's most sophisticated investors. This journey has been marked by exceptional returns, exceptional volatility, and important new questions about its future risk-return characteristics. As institutional investors increasingly weigh the asset's unique characteristics, access to high-quality data and forecasts becomes even more critical when modeling Bitcoin's role in their portfolios. This report provides that foundation. Our analysis leads us to the following key capital market assumptions for Bitcoin over the next decade: 1. Institutional investors will allocate 1% to 5% of their portfolios to Bitcoin, representing $1 trillion to $5 trillion. 2. Growing government debt, public spending, and monetary expansion will exert downward pressure on fiat currencies, which will increase demand for stores of value like gold and Bitcoin. 3. Given the growing acceptance of Bitcoin by Wall Street and mainstream society, recent regulatory developments are unlikely to be reversed in the future political environment. 4. We believe Bitcoin's historical four-year cycle no longer applies due to a diminishing impact from the halving, the depth of new institutional demand, and the durability of regulatory developments. Combining all of this, we forecast Bitcoin to have a compound annual growth rate of 28.3% and volatility of 32.9% over the next decade, with continued low correlation to stocks, bonds, commodities, and other traditional assets. In this scenario, the next decade will represent Bitcoin's institutional era, one in which it becomes a mainstream alternative asset that no thoughtful investor can ignore.
While we strongly favor the TAM (Total Addressable Market) model, various other Bitcoin valuation models are widely followed in the crypto industry. We do not endorse these models. However, given their widespread popularity—and the reality that no model is perfect—it is worth considering what the three most commonly cited models say about Bitcoin's potential appreciation.
The Bitcoin stock-to-flow model was originally proposed in 2019 by the pseudonymous crypto research analyst PlanB in a paper titled "Modeling Bitcoin's Value with Scarcity." The stock-to-flow model posits that Bitcoin's value is related to its scarcity. Specifically, it posits a logarithmic relationship between Bitcoin's market value and the ratio of its total circulating supply ("stock") to its annual new supply ("flow"). The model is closely aligned with the view that Bitcoin's four-year "halving" process—in which the number of newly produced Bitcoins is halved each year—is a key driver of the asset's value. PlanB updated the model in April 2020, introducing the "Stock-to-Flow Cross-Asset Model," which examines multiple assets on a relationship basis. Critics of the stock-to-flow model point to its inherent bullish bias: because Bitcoin's stock-to-flow ratio programmatically increases over time, the model predicts that Bitcoin will continue to rise forever. Others point out that it does not account for macroeconomic or regulatory developments. The stock-to-flow model predicts a Bitcoin price of $1.16 million in 2035. Model 2: The Bitcoin Power Law Model The Bitcoin Power Law Model, proposed in 2022 by a crypto researcher using the pseudonym Dilution-proof, has gained traction as an alternative to the stock-to-flow model. The Bitcoin Power Law Model is based on the observation that Bitcoin's price has historically followed a power-law relationship. The model predicts that Bitcoin's price will fluctuate between support and resistance levels, which can be estimated by connecting previous highs (and lows) on a logarithmic chart of Bitcoin's price versus time. The Bitcoin Power Law Model is a descriptive model, not a causal one. Like the stock-to-flow model, it is bullish by definition, predicting that Bitcoin will continue its upward trajectory over time. The Bitcoin Power Law Model projects a Bitcoin price of $1.5 million in 2035. Model 3: The Bitcoin Autocorrelation Exchange Rate Model (BAERM) The Bitcoin Autocorrelation Exchange Rate Model (BAERM) is a quantitative model designed to explain and predict Bitcoin's price based on the premise that Bitcoin's returns are autocorrelated—that is, its price moves according to a self-referencing historical pattern. The model assumes that Bitcoin's price expands exponentially over time, but this trend is influenced by halving periods, market effects, and the day-to-day autocorrelation of Bitcoin's price. The model is complex. It attempts to provide a more comprehensive analysis of Bitcoin's historical price trends than standard trend-following or momentum models, while still attempting to account for the true impact of momentum in the Bitcoin space. The model is backward-looking and does not incorporate factors such as demand, macroeconomic conditions, or regulatory developments. Skeptics argue that it over-indexes historical returns and that out-of-sample results from this recently introduced model will be less predictive than historical results. Since the model was only recently introduced (2023-24), it is too early to tell. The Bitcoin Autocorrelation Exchange Rate Model predicts a Bitcoin price of $7.5 million in 2035. Download the Bitwise research report PDF: https://s3.us-east-1.amazonaws.com/static.bitwiseinvestments.com/Research/Bitwise-Bitcoin-Long-Term-Capital-Market-Assumptions-2025.pdf
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