Bitcoin (CRYPTO:BTC) has returned 150% over the past year, easily outpacing the U.S. stock market. But Bernstein analysts Gautam Chhugani and Mahika Sapra expect the cryptocurrency to grow much higher over the next decade. Their price targets are listed below, along with the implied upside based on Bitcoin’s current price of $66,000.
2025: $200,000 (implied 202% increase)
2029: $500,000 (implied increase of 658%)
2033: $1 million (implied increase of 1,415%)
Chhugani and Sapra gave two reasons for their confidence in a recent note to clients. First, the demand for Bitcoin among institutional investors tends to increase due to the recent approval of spot Bitcoin ETFs. Second, 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 driven demand among institutional investors
The SEC approved 11 Spot Bitcoin ETF applications in January 2024. This was a major development for two reasons. First of all, Bitcoin now bears the regulatory seal of approval, which legitimizes the cryptocurrency as an institutional asset. Second, spot Bitcoin ETFs provide direct exposure to Bitcoin without the complexities of cryptocurrency trading, and they often cost less.
For example, the iShares Bitcoin Trust (NASDAQ:IBIT) supports an expense ratio of 0.25%, meaning the annual fees on a $10,000 portfolio would total $25. But Global Coinbase charges up to 0.6% per transaction, meaning a $10,000 transaction could cost $60.
Collectively, this value proposition resonates with the market. Actually, black rockiShares Bitcoin Trust and Fidelity Wise Original Bitcoin Trust (NYSEMKT:FBTC) have accumulated more assets in their first 50 days on the market than any ETF in history, according to Bloomberg Intelligence. The iShares Bitcoin Trust also reached $10 billion in assets faster than any other ETF, according to the Wall Street Journal.
It is also worth noting that according to Forms 13F filed with the SEC, more than 400 institutional investors purchased positions in the iShares Bitcoin Trust in the first quarter and more than 200 purchased positions in the Wise Origin Bitcoin Trust. These figures include 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 U.S. regulated ETFs were a watershed moment for crypto that drove structural demand from traditional capital pools.”
Bitcoin Halving Events Have Always 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 Bitcoin’s supply is fixed. Periodic halving events are the mechanism by which the 21 million coin supply limit is enforced.
To be more specific, Bitcoin mining grants – newly minted Bitcoin awarded to miners who successfully validate a transaction block – decrease by 50% for every 210,000 blocks added to the blockchain. Halving events occur approximately once every four years and are important because they reduce selling pressure, simply because miners are left with less Bitcoin to sell.
Halving events have consistently preceded significant price appreciation, as shown in the chart below.
Bitcoin halved | Price cut in half | Price at next halving | Back |
|---|---|---|---|
November 28, 2012 | $12 | $647 | 5.291% |
July 9, 2016 | $647 | $8,821 | 1,263% |
May 11, 2020 | $8,821 | $63,462 | 619% |
Data source: Morgan Stanley, YCharts.
The most recent halving event took place on April 19, 2024, when Bitcoin traded at $63,462. As noted above, history indicates that Bitcoin will be worth more by the next halving event in 2028. The chart also shows that the yield has decreased with each subsequent halving event, so the rise 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 of the newly minted Bitcoin was 25 BTC per block. This halving event had a more profound impact on supply than the next halving event, when the block subsidy was reduced from 25 BTC to 12.5 BTC in 2016.
With this in mind, the most recent halving event – which reduced the block subsidy from 6.25 BTC to 3.125 BTC – is expected to be the least impactful yet. However, spot Bitcoin ETFs are an unknown variable that could significantly alter Bitcoin’s price trajectory over the next four years. In other words, while past performance never guarantees future returns, Bitcoin could return over 619% by 2028.
Bitcoin is a profitable 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 heading toward $1 million. Cathie Wood recently said its price could reach $3.8 million if institutional investors allocated a little more than 5% of their assets to the Bitcoin ETF spot, as she believes they will.
However, while price targets are fun to consider, investors should remember that no one knows what Bitcoin will be worth tomorrow, let alone ten years from now. There are certainly reasons to be optimistic, but there are also reasons to be cautious. Bitcoin fell 75% between November 2021 and November 2022, and a similar decline is possible (even likely) in the future.
Investors who find this idea intolerable should avoid Bitcoin. But investors comfortable with this level of volatility should consider purchasing a position in Bitcoin (or a spot Bitcoin ETF) today.
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Trevor Jennevine has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.
1 Top Cryptocurrencies to Buy Before They Soar 1,415% to $1 Million, Some Wall Street Analysts Say was originally published by The Motley Fool
