Bitcoin (BTC) Price Predictions: Will the Digital Asset Hit $1.5 Million or Come to a "Bad Ending"?

Which investor is likely to be right about Bitcoin: Cathie Wood or Warren Buffett? Below, I'll make the case for a bullish and bearish position on crypto, and explain which scenario I think is more likely to play out for Bitcoin in the long run.

Cathie Wood and Warren Buffett are two of the most successful investors in the world, but they have very different views on cryptocurrency. Wood is bullish on Bitcoin and other digital assets, while Buffett has warned that they will “come to a bad ending.”

So, who is more likely to be right about Bitcoin in the long run? Here's a look at both sides of the argument.

The case for Bitcoin rising to $1.5 million

Bitcoin has already generated terrific returns for investors during the past five years, rising by about 1,000%. The digital currency has been gaining ground with investors as a way to store value and diversify.

Bullish investors see crypto as a new type of asset class and believe that as more companies and individual investors add crypto to their portfolios, that can help drive Bitcoin's valuation even higher. Even if investors allocate a small percentage of the money in their portfolio to crypto, that can lead to a surge in demand, pushing the value of the digital currency significantly higher in the future.

The launch of many spot Bitcoin exchange-traded funds last year also made it easier than ever for investors to gain exposure to Bitcoin, without having to set up a digital wallet or use a crypto trading platform. As there are more ways to invest in crypto, it will help encourage more investors to add it to their portfolios and, thus, result in a rising valuation for Bitcoin.

The incoming Trump administration may also put into place more crypto-friendly policies and even set up a federal reserve of Bitcoin, which may result in other governments following suit. Such moves may also entice more of the general public to invest in Bitcoin.

The case for another Bitcoin crash

For Bitcoin to come to a "bad ending" wouldn't necessarily have to mean that the cryptocurrency will fall to zero. But it would definitely suggest that a big crash may be in the cards, similar to the dot-com crash, which occurred in the early 2000s.

The reason it could happen is that cryptocurrencies are incredibly volatile and speculative investments. While Bitcoin has soared in recent years, a lot of that has to do with the growing popularity of meme stocks and high-risk investments. Many retail investors have been willing to bet on risky plays in the hopes of winning big or simply proving short-sellers wrong. One example is car rental company Hertz, which filed for bankruptcy in 2020. Retail investors piled money into the stock, sending it soaring. It has emerged from bankruptcy but remains a highly risky investment today.

A lot depends on retail investors and how willing they are to keep putting money into a high-risk investment such as Bitcoin, which has limited use cases and doesn't truly solve a problem for the economy. It rises in value for speculative reasons; many investors simply buy it because they believe it will increase in value, which is what the greater fool theory is all about. And that's a dangerous way to look at any investment.

There is a high degree of risk that the excitement surrounding Bitcoin could wane and retail investors pull their money out of the speculative investment in the future, potentially to follow the next big thing. And should that happen, a big crash, or a "bad ending" could follow.

Which scenario is more likely?

The scenario I think is more likely to play out over the next five years is that a big crypto crash will come. It may not spell the end of the digital asset, but it looks like a more probable scenario than assuming the digital currency will generate 10-fold or 15-fold returns from here on out.

The excitement is high around crypto these days but you can say the same about many other types of high-risk investments in tech and artificial intelligence. Hype alone isn't going to continue to drive valuations higher forever and sooner or later a correction could take place. The same can be true about Bitcoin. It's a highly risky and speculative investment and as investors become more concerned about the economy or there's some unfavorable crypto-related news, a sell-off could ensue.

Investors should tread carefully as Bitcoin is not a suitable investment for the majority of portfolios. There are many solid growth stocks to consider instead, which come with much less risk and that can still generate fantastic returns for investors in the long run.