The first cryptocurrency to buy before it rises 1,415% to $1 million, according to some Wall Street analysts

Bitcoin (CRYPTO:BTC) has returned 150% over the past year, easily outperforming the US stock market. But Bernstein analysts Gautam Chhugani and Mahika Sapra expect the cryptocurrency to move much higher over the next decade. Their price targets are listed below, along with implied upside based on Bitcoin’s current price of $66,000.

• 2025: $200,000 (202% implied upside)

• 2029: $500,000 (658% implied upside)

• 2033: $1 million (1.415% implied upside)

Chhugani and Sapra explained two reasons for their confidence in a recent note to clients. First, demand for Bitcoin among institutional investors tends to increase due to the recent approval of spot Bitcoin ETFs. Secondly, Bitcoin’s supply is limited to 21 million coins by periodic halving events.

Here’s what investors should know about Bitcoin.

Spot Bitcoin ETFs have already increased demand among institutional investors

The SEC approved 11 Spot Bitcoin ETF questions in January 2024. This was an important development for two reasons. First, Bitcoin it now carries the regulatory seal of approval, legitimizing the cryptocurrency as an institutional asset. Second, spot Bitcoin ETFs provide direct exposure to Bitcoin without the complexities of cryptocurrency exchanges and often cost less.

For example, the iShares Bitcoin Trust (NASDAQ:IBIT) has an expense ratio of 0.25%, meaning the annual fee on a $10,000 portfolio would amount to $25. But Global Coinbase charges up to 0.6% per transaction, meaning a $10,000 trade could cost $60.

Collectively, that value proposition resonates with the market. Indeed, Black rockof iShares Bitcoin Trust and Fidelity Wise Origin Bitcoin Trust (NYSEMKT: FBTC) have accumulated more assets in their first 50 days on market than any ETF in history, according to Bloomberg Intelligence. According to the Wall Street Journal, the iShares Bitcoin Trust also reached $10 billion in assets faster than any other ETF.

Also noteworthy is that, according to 13F forms filed with the SEC, over 400 institutional investors purchased positions in the iShares Bitcoin Trust and more than 200 purchased positions in the Wise Origin Bitcoin Trust in the first quarter. Included in these numbers are Citadel Advisors, DE Shaw and Millennium Management, the three most profitable hedge funds in history.

In their note to clients, Bernstein analysts Gautam Chhugani and Mahika Sapra explained why spot Bitcoin ETFs could drive greater institutional adoption in the future. “We believe that US-regulated ETFs represented a watershed moment for cryptocurrencies, as they brought structural demand from traditional capital pools.”

The story continues

Bitcoin halving events have consistently been followed by price appreciation

Bitcoin is like other assets in that its price is determined by supply and demand. But unlike most assets, demand is the most important variable because the supply of Bitcoin is fixed. Periodic halving events are the mechanism through which the 21 million coin supply limit is enforced.

To elaborate, Bitcoin mining subsidies (newly minted Bitcoins awarded to miners who successfully validate a block transaction) decrease by 50% every time 210,000 blocks are added to the blockchain. Halving events occur approximately once every four years and are significant because they reduce selling pressure, simply because miners have less Bitcoin left to sell.

Halving events have consistently preceded significant price appreciation, as shown in the chart below.

Bitcoin halving

Half price

Price at next halving

Return

Data source: Morgan Stanley, YCharts.

The most recent halving event took place on April 19, 2024, when Bitcoin was trading at $63,462. As shown above, history says that Bitcoin will be worth more by the next halving in 2028. The chart also shows that the yield has decreased with each subsequent halving, so much so that the upside this time is less than 619%.

This trend is due to the decreasing impact of halving events on total supply. For example, the block subsidy was reduced from 50 BTC to 25 BTC in 2012, meaning the absolute reduction in newly minted Bitcoin was 25 BTC per block. That halving had a deeper impact on supply than the next halving, when the block subsidy was cut from 25 BTC to 12.5 BTC in 2016.

With this in mind, the most recent halving event, which cut the block subsidy from 6.25 BTC to 3.125 BTC, is expected to be the least impactful to date. However, Bitcoin spot ETFs are an unknown variable that could significantly alter Bitcoin’s price trajectory over the next four years. In other words, while past performance is never a guarantee of future returns, Bitcoin could return more than 619% by 2028.

Bitcoin is a worthwhile investment, but only for those who can tolerate volatility

Gautam Chhugani and Mahika Sapra aren’t the only Wall Street analysts who think Bitcoin is headed for $1 million. Cathie Wood recently said her price could reach $3.8 million if institutional investors allocate just over 5% of their assets to spot Bitcoin ETFs, as she thinks they will.

However, while price targets are fun to consider, investors should remember that no one knows what Bitcoin will be worth tomorrow, much less ten years from now. There are certainly reasons to be bullish, but there are also reasons to be cautious. Bitcoin fell 75% between November 2021 and November 2022, and a similar decline is possible (or even likely) in the future.

Investors who find this idea intolerable should avoid Bitcoin. But investors who are comfortable with that level of volatility should consider purchasing a position in Bitcoin (or a spot Bitcoin ETF) today.

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Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.

The first cryptocurrency to buy before it rises 1,415% to $1 million, according to some Wall Street analysts was originally published by The Motley Fool

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