Bitcoin (BTC +0.00%) 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 move much higher in 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 (202% implied upside)
- 2029: $500,000 (658% implied upside)
- 2033: $1 million (1,415% implied upside)
Chhugani and Sapra gave two reasons for their confidence in a recent note to clients. First, Bitcoin demand among institutional investors is trending higher due to the recent approval of spot Bitcoin ETFs. Second, Bitcoin supply is limited to 21 million coins by periodic halving events.
Here's what investors should know about Bitcoin.
CRYPTO: BTC
Key Data Points
Spot Bitcoin ETFs have already boosted demand among institutional investors
The SEC approved 11 spot Bitcoin ETF applications in January 2024. That was a major development for two reasons. First, 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 exchanges, and they often cost less.
For instance, the iShares Bitcoin Trust (IBIT 0.19%) bears an expense ratio of 0.25%, meaning the annual fee on a $10,000 portfolio would total $25. But Coinbase Global charges up to 0.6% per transaction, meaning a $10,000 trade could cost $60.
Collectively, that value proposition is resonating with the market. In fact, BlackRock's iShares Bitcoin Trust and Fidelity's Wise Origin Bitcoin Trust (FBTC 0.23%) accumulated more assets in their first 50 days on the market than any ETFs 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.
Also noteworthy, according to Forms 13F filed with the SEC, over 400 institutional investors bought positions in the iShares Bitcoin Trust in the first quarter, and more than 200 bought positions in the Wise Origin Bitcoin Trust. Included in those numbers are Citadel Advisors, D.E. 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 may drive greater institutional adoption in the future. "We believe that U.S. regulated ETFs were the watershed moment for crypto that brought in structural demand from traditional pools of capital."
Bitcoin halving events have consistently been followed by pricing appreciation
Bitcoin is like other assets in that its price is determined by supply and demand. But unlike most assets, demand is the most consequential variable because Bitcoin supply is fixed. Periodic halving events are the mechanism by which the 21-million-coin supply limit is enforced.
To elaborate, Bitcoin mining subsidies -- newly minted Bitcoin awarded to miners that successfully validate a transaction block -- decrease by 50% each time 210,000 blocks are added to the blockchain. Halving events occur about once every four years, and they are significant 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 Halving |
Price At Halving |
Price At Next Halving |
Return |
|---|---|---|---|
|
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 shown above, history says Bitcoin will be worth more by the next halving event in 2028. The chart also shows that the return has declined with each subsequent halving event, such that the upside this time is less than 619%.
That trend is due to the diminishing impact of halving events on total supply. For instance, the block subsidy was cut from 50 BTC to 25 BTC in 2012, meaning the absolute reduction in newly minted Bitcoin was 25 BTC per block. That halving event impacted supply more profoundly than the next halving event, when the block subsidy was cut from 25 BTC to 12.5 BTC in 2016.
With that in mind, the most recent halving event -- which cut the block subsidy from 6.25 BTC to 3.125 BTC -- should be the least impactful to date. 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 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 are not the only Wall Street analysts that think Bitcoin is headed to $1 million. Cathie Wood recently said its price could reach $3.8 million if institutional investors allocate a bit more than 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, let alone a decade from now. There are certainly reasons to be bullish, but there are also reasons to be cautious. Bitcoin declined 75% between November 2021 and November 2022, and a similar drawdown is possible (or even probable) in the future.
Investors who find that idea intolerable should steer clear of Bitcoin. But investors comfortable with that level of volatility should consider buying a position in Bitcoin (or a spot Bitcoin ETF) today.
