Coinbase CEO Brian Armstrong Says $400,000 Is Within Reach for Bitcoin. Here's Why He's Right.

Bitcoin (CRYPTO: BTC) is back. Or, at least, that's what the crypto bulls would have you believe after a phenomenal August, in which Bitcoin gained 23%. In fact, Coinbase Global CEO Brian Armstrong now thinks that Bitcoin -- currently trading at $77,000 -- could hit a price of $400,000 by the end of 2030.

So what would it take for that to happen, and just how likely is it?

Does the math work for a price of $400,000?

The starting point, of course, is figuring out how fast Bitcoin will need to grow over the next four years. Assuming it ends 2026 at its current $77,000 level, Bitcoin will need to grow at a compound annual growth rate (CAGR) of 51% over the next four years to reach $400,000.

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That's not entirely out of the question, given how fast Bitcoin has grown over the past decade. For example, from August 2017 to July 2026, Bitcoin grew at a CAGR of 33.6%. Based on those results, Armstrong says $400,000 is a "reasonable target."

A more likely target, though, might be $250,000. That assumes a 34% CAGR, which is closer to Bitcoin's historical growth rate.

How does Bitcoin grow at a 51% clip?

With that context, it's helpful to consider potential catalysts that could generate an extraordinary growth rate of 51%.

One major factor, says Armstrong, will be newfound regulatory clarity for the crypto industry brought on by the passage of the Digital Asset Market Clarity Act (Clarity Act). In the best case, this will accelerate innovation in the digital asset space, make it easier for institutions to hold Bitcoin, and unlock sidelined capital.

Another major factor, according to Armstrong, will be the mainstreaming of the "Bitcoin is digital gold" investment thesis. Given the out-of-control spending by the U.S. government, its mounting $40 trillion debt load, and the looming risk of persistent deficits, investors will increasingly turn to Bitcoin as a potential hedge.

But is that really enough to push Bitcoin to $400,000? From my perspective, it will likely take creating an additional use case for Bitcoin -- or bulking up an existing one -- to make that happen. Simply becoming a "store of value" along the lines of physical gold is not enough to generate 51% growth rates.

For example, what if Bitcoin finally emerges as an accepted form of payment for everyday commerce? This scenario is one that Silicon Valley VC Tim Draper has been pushing for years. Or what happens if the U.S. government starts buying Bitcoin in size for the Strategic Bitcoin Reserve? Either of these two catalysts might be enough to send Bitcoin to $400,000.

Just remember: Bitcoin typically soars in value only after its much-ballyhooed halving event, which takes place every four years. The next halving is tentatively scheduled for April 2028, so you'll likely need to be patient between now and then. If you wait 18 months from now, that's when the really bullish price action for Bitcoin might take place.

Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.