Bitcoin's price is on the rise, and what will happen next remains uncertain

Bitcoin's price is on the rise, and what will happen next remains uncertain. However, according to The Economist, there are some insights and predictions to consider:
1️⃣ Bitcoin has shown a 63% increase in value this year. For a brief period, everyone holding Bitcoin was making money. On March 5th, the cryptocurrency reached just over $69,000 before retracting slightly, marking a notable comeback from the dark days of November 2022 when interest rate hikes dampened risk appetite and the crypto exchange ftx collapsed. Buying Bitcoin from such exchanges seemed like slightly more than just another way to get robbed.
2️⃣ It can't be said that Bitcoin is rising alone. Everything is going up. Stock markets worldwide are hovering near record levels. Gold prices are too. Even bond prices have climbed after a dismal two-year period. The catalyst is a combination of excitement about artificial intelligence, joy about the state of the global economy, and expectations of looser monetary policy.
Still, Bitcoin seems to be outperforming most assets. On January 10th, the SEC approved applications from 11 investment firms, including BlackRock and Fidelity, to create bitcoin exchange-traded funds (ETFs). These make it easier for everyday investors to buy cryptocurrency. Instead of setting up accounts on an exchange, creating a crypto wallet, making a bank transfer, and finally buying Bitcoin, people can now log into brokerage accounts and buy an ETF.
Assets in the top ten bitcoin ETFs now total around $50 billion. And this activity seems to be self-reinforcing: the more money that flows in, the higher the price goes, the more people talk about bitcoin ETFs, the more money flows in, and so on.
Bitcoin has been around for 14 years. It has never been hacked, which means the token isn't going anywhere. But its use for payments is now quite limited due to both high costs and slow transaction speeds. Those trying to build applications on top of blockchains aren't doing it using Bitcoin anymore. With the creation of ETFs, it seems like Bitcoin's future won't extend beyond being an investment asset.
✅ So what will returns look like after this initial surge of interest?
Making a prediction based on Bitcoin's entire history would be foolish. Over the past 14 years, cryptocurrency has evolved from a niche cyberpunk idea to something approaching a mainstream financial asset. However, recent price movements may provide some clues.
There are two explanations for this:
1️⃣ Firstly, purchases are essentially a broad bet on technological progress, with variations reflecting expectations for the cryptocurrency itself. For example, in mid-2021, Bitcoin fell after Elon Musk tweeted negatively about crypto payments, even as tech stocks rose. Prices also fell in late 2022 despite rising stock markets, due to ftx's failure.
2️⃣ The other theory is that Bitcoin is a kind of digital gold. After all, just like the supply of gold is inherently limited by the amount of metal in the ground, supply is also limited. Neither asset provides returns or profits. This theory fell out of favor with the rise in inflation and Bitcoin's crash in 2021 and 2022, but last year, the cryptocurrency once again moved in line with gold.
Perhaps both theories contain some truth.
For example, allocating 1% of a fund to Bitcoin could be a low-risk hedge. If investors buy into this argument, Bitcoin's price will likely continue to rise for a while.
➡️ So what will happen when cryptocurrency completes its transformation into a standard financial asset?
Let's assume Bitcoin is added to most investor portfolios. Let's also assume that cryptocurrency technology doesn't really catch on. In this scenario, returns on Bitcoin will likely resemble those of gold: it has a fixed amount, and its price will roughly increase parallel to the money supply in the long run.
This means stable single-digit returns. The creation of a Bitcoin ETF may have started the frenzy of dazzling gains, but the future it signifies could be slower and steadier.