Bitcoin Is Headed to $500,000 According to This Wall Street Analyst and the Reasoning Is Hard to Dismiss

When stock market growth is scarce, investors often rotate into alternatives like cryptocurrency. However, the last few months haven't been kind to the crypto community, either. The price of Bitcoin (CRYPTO: BTC) has cratered 20% this year -- hovering around $70,500 per coin as of March 20.

Nevertheless, digital asset analyst Geoffrey Kendrick of Standard Chartered recently said that Bitcoin could be set up for explosive growth. Is now a good time to buy the dip in Bitcoin?

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What is Geoffrey Kendrick's forecast for Bitcoin?

One of Kendrick's core observations about Bitcoin is that he sees volatility around the cryptocurrency as similar to growth stocks on the Nasdaq. Kendrick posits the idea that should technology companies report weak earnings in the coming quarter, further selling pressure could ensue and ultimately permeate to Bitcoin.

He also notes that if the Federal Reserve chooses not to ease monetary policy, then investors may not be inclined to invest in riskier assets such as Bitcoin anytime soon.

Given these factors, Kendrick's near-term forecast for Bitcoin is $50,000 -- implying roughly 32% downside from current levels. This makes sense as it is relatively in line with prior bottoms during drawdowns in recent years.

Bitcoin Price data by YCharts.

However, the analyst thinks the current selling pressure is "shallower" compared to more dramatic crypto winters. Ultimately, Kendrick remains confident that by the end of the year, Bitcoin could witness a sharp rebound and surge to $100,000.

What could fuel Bitcoin's price to $500,000?

Bitcoin's biggest value proposition is its perception as a scarce asset. In total, there will only ever be 21 million Bitcoins in circulation. These mechanics paint Bitcoin as rare. For this reason, many investors colloquially refer to Bitcoin as "digital gold."

When it comes to other rare asset classes like art or collectibles, the most prized opportunities are often reserved for high-net-worth individuals. Bitcoin hasn't fully gone through this transformation, however.

For much of its history, Bitcoin has been a staple in retail investing communities. Only in the past couple of years have institutional portfolios begun to take cryptocurrency seriously. With banks launching spot Bitcoin ETFs, allocating a portion of your portfolio to the cryptocurrency's asymmetric upside has become much easier and cost-efficient -- making it more appealing.

Kendrick's theory -- one that's also shared by Cathie Wood of Ark Invest -- is that as institutional capital continues to flow toward Bitcoin, its price could experience significant valuation expansion in the long run.

What risks come with investing in Bitcoin?

One of the biggest risks I see with an investment in Bitcoin is the constant comparison of the cryptocurrency to gold.

Currently, the estimated market cap of gold is roughly $34 trillion. Bitcoin is much smaller -- valued at $1.4 trillion. The underlying assumption is that Bitcoin will eventually match gold’s total market value. However this thesis isn't set in stone. Assuming all 21 million coins are mined, the implied future price of Bitcoin would be about $1.6 million per coin for the cryptocurrency to be valued in line with gold.

It's easy to buy into the idea that since this scenario is so overwhelmingly bullish, then Kendrick's forecast of $500,000 becomes totally feasible. In reality, I think his assumptions are also quite optimistic. Unlike gold, Bitcoin's value is heavily influenced by interest rates, risk appetite and regulation.

While I understand Kendrick's logic and see a path for Bitcoin to become a multibagger, I think it will take much longer than most investors realize to achieve these targets.

Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool recommends Standard Chartered Plc. The Motley Fool has a disclosure policy.