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The first cryptocurrency to buy before it rises from 635% to 5,480%, according to some Wall Street analysts
Risky assets usually perform better when interest rates are low. As such, speculation that persistent inflation will push Federal Reserve policymakers to cut rates more slowly than expected has been a headwind for cryptocurrencies in recent weeks.
In fact, while Bitcoin (CRYPTO: BTC) reached a new record high of $73,000 in March, since then its price has fallen by 7% to $68,000. However, several Wall Street analysts see substantial upside for patient investors.
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Tom Lee, managing partner and head of research at Fundstrat Global Advisors, believes that the combination of the recently approved Bitcoin spot Exchange Traded Funds (ETFs), the recent halving of Bitcoin block subsidies and the possible easing of monetary policy (interest rates lower) could push Bitcoin to $150,000 by 2025 and $500,000 by 2029. The latter figure implies a 635% upside from its current price of $68,000.
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Anthony Scaramucci, founder and managing partner of SkyBridge Capital, recently told CNBC that spot Bitcoin ETFs could push the cryptocurrency beyond gold’s market capitalization, which is currently around $16 trillion. In this scenario, a single Bitcoin would be worth around $800,000, implying an upside of around 1,075% from its current price.
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Cathie Wood, CEO and CIO of Ark Invest, believes that spot Bitcoin ETFs will eventually capture around 5% of institutional assets under management, pushing the price of a single Bitcoin to $3.8 million. This estimate implies an increase of approximately 5,480% compared to the current price.
As a word of caution, investors should never put too much faith in price targets. They are simply educated guesses about what might happen in the future. That said, Bitcoin deserves further consideration given the huge upside implied by the price targets above. Here’s what investors should know.
The investment thesis for Bitcoin is simple
The price of Bitcoin it is based on supply and demand. However, since the supply is limited to 21 million coins, demand is the most important variable. This means that the future trajectory of Bitcoin’s price depends on whether demand increases or decreases from the current level.
Two recent developments could spur demand in the coming months and years. First, the Security and Exchange Commission (SEC) approved Bitcoin spot ETFs in January 2024. Second, the Bitcoin block subsidy was halved in April 2024.
Spot Bitcoin ETFs could bring institutional investors to the market
Spot Bitcoin ETFs provide investors with direct exposure to Bitcoin through their brokerage accounts, meaning there is no need to create new accounts with cryptocurrency exchanges. Additionally, although spot Bitcoin ETFs charge annual fees expressed as an expense ratio, they are often lower than the transaction fees charged by cryptocurrency exchanges.
The story continues
In short, spot Bitcoin ETFs reduce friction for both retail and institutional investors. When I say institutional investors, I am referring to professional fund managers such as family offices, endowments, hedge funds, insurance companies and investment banks. According to PwC, institutional assets under management (AUM) will reach $145 trillion by 2025. If even a small portion of that total goes into Bitcoin, the cryptocurrency’s price could rise substantially.
As mentioned, Ark Invest believes that spot Bitcoin ETFs will end up capturing just over 5% of institutional AUM, implying around $8 trillion (based on PwC’s estimate). For context, we are nowhere near that figure at the moment. Spot Bitcoin ETFs have approximately $57 billion in assets under management, and most of that money comes from retail investors.
However, US regulators only approved spot Bitcoin ETFs in January, and the early results are undoubtedly encouraging. THE iShares Bitcoin Trust (NASDAQ:IBIT) by Black rock and the Wise Origin Bitcoin Trust Fidelity’s (NYSEMKT: FBTC) accumulated more assets in its first 50 days on market than any other ETF in history, according to Bloomberg’s Eric Balchunas.
Furthermore, Form 13Fs filings for the first quarter of 2024 show that a few hundred institutional investors have purchased small positions in various spot Bitcoin ETFs. This includes banks like JP Morgan Chase, US BankAND Wells Fargoas well as highly profitable hedge funds such as Citadel, DE Shaw and Millennium Management.
The halving of Bitcoin block subsidies should reduce selling pressure from miners
Bitcoin miners earn through block subsidies and transaction fees, collectively referred to as block rewards. Block subsidies, which represent newly minted Bitcoin, are halved every time 210,000 blocks (groups of transactions) are validated and added to the blockchain, which happens about once every four years.
The most recent halving event took place in April 2024, when the block subsidy dropped from 6.25 BTC to 3.125 BTC. This was the fourth halving since Bitcoin was created, and the implied reduction in selling pressure (miners will have less Bitcoin to sell over the next four years) bodes well for investors because it would equate to an increase in demand.
In fact, Bitcoin has seen significant price appreciation following past halving events.
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November 2012 |
2.964% |
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July 2016 |
922% |
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May 2020 |
348% |
Data source: Fidelity Digital Assets.
Is Bitcoin a good investment?
Investors who are comfortable with risk and volatility should consider purchasing a small position in Bitcoin today, provided they have the right mindset. Cryptocurrency prices can rise and fall rapidly, sometimes for seemingly senseless reasons, so investors should be prepared to hold their Bitcoin through ups and downs for an extended period of time.
Furthermore, there is no guarantee that Bitcoin will ever reach the price targets mentioned above. For this reason, Bitcoin is best viewed as one component of a diversified portfolio.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin, JPMorgan Chase and US Bancorp. disclosure policy.
The first cryptocurrency to buy before it rises from 635% to 5,480%, according to some Wall Street analysts was originally published by The Motley Fool