Prediction: Bitcoin Will Be Worth $2.5 Trillion in 3 Years

It's easy to find outlandish price targets for Bitcoin (CRYPTO: BTC). For example, some top investors think that a single Bitcoin will be worth upwards of $1 million within just a few years.

Just how realistic is that target? A more likely scenario is that Bitcoin will regain its all-time high of $126,000 within the next three years. Given a total circulating coin supply of 20 million, that works out to a total market cap of $2.5 trillion.

What is a realistic growth rate for Bitcoin?

Let's start with the obvious -- Bitcoin is no longer growing as fast as it was during its early years. While Bitcoin is still capable of delivering triple-digit returns to investors for years, it is unlikely to have the sort of year that it had in 2013, when it soared in value by 5,429%.

In short, Bitcoin has entered a new maturity phase, powered by a huge influx of money from institutional investors. Bitcoin, like any cryptocurrency, will continue to be volatile. But it will no longer be as explosive as it once was. It will begin to behave more and more like a high beta tech stock.

That means investors might need to settle for an annual growth rate of 25%. That figure is in line with what top tech stocks can deliver. Bitcoin, with a $1.3 trillion market cap, certainly fits into that category. That's roughly the size of Tesla (NASDAQ: TSLA), which has a market cap of $1 trillion.

Bitcoin's path to $126,000

So let's do the math. Let's assume that Bitcoin will grow at a compound annual growth rate (CAGR) of 25% over the next three years. Using $65,000 as a starting price, that works out to a final price of roughly $126,000 in three years.

That means Bitcoin will regain its all-time high from October 2025, but it will take some time. At that price, Bitcoin will be worth roughly $2.5 trillion.

Just be aware: A CAGR of 25% does not mean that Bitcoin will churn out 25% gains each year. Instead, that's the "smoothed-out" growth rate. There will be highs and lows. Bitcoin has always been very cyclical, with the good years more than making up for the bad years.

Maybe a total market cap of $2.5 trillion sounds underwhelming. Perhaps it is. That being said, there's nothing wrong with a CAGR of 25%. The extra risk that you take by investing in a cryptocurrency such as Bitcoin is more than compensated for by the extra return. I'm still bullish on Bitcoin, but I'm also keeping my expectations in check going forward.

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