Some Wall Street analysts see a new investment opportunity in the cryptos sector, stating that a significant chance around Bitcoin is forming due to the approval of the Bitcoin spot ETF.
Artificial Intelligence (AI) has been one of the hottest investment themes on Wall Street this year,$NVIDIA (NVDA.US)$becoming one of the most sought-after stocks in the industry because of its leading position in the machine learning processor sector. However, some Wall Street analysts see a new investment opportunity in the cryptos sector, stating that a significant chance around Bitcoin is forming due to the approval of the Bitcoin spot ETF.
Gautam Chhugani and Mahika Sapra of Bernstein believe that Bitcoin may reach $200,000 by 2025, $500,000 by 2029, and $1 million by 2030. This prediction ultimately means that Bitcoin's price has 1415% room for growth compared to its current price of $66,000. "Wood Sister" Kathy Wood also gave her own prediction last year, estimating that Bitcoin could reach $1.5 million by 2030, but after the approval of the Bitcoin spot ETF, she raised this number to $3.8 million. Her latest prediction means that Bitcoin will rise by 5655% compared to its current price.
"Wood Sister" Cathie Wood also gave her prediction last year, estimating that Bitcoin could reach $1.5 million by 2030. After the approval of the Bitcoin spot ETF, she raised this number to $3.8 million. Her latest forecast means Bitcoin will rise 5655% from its current price.
At the same time, several successful hedge fund managers in the first quarter sold their Nvidia stocks and bought into Bitcoin, one of the recently approved spot Bitcoin ETFs.$iShares Bitcoin Trust (IBIT.US)$Moreover, spot Bitcoin ETFs are usually cheaper. The expense ratio of the iShares Bitcoin Trust is 0.25%, which means that investors only need to pay $25 per year for every $10000 invested. However, for orders below $10000, there is a fee of 0.4% to 0.6% per transaction, and investors have to pay this higher fee twice- once when buying and again when selling.
Spot Bitcoin ETFs are unleashing institutional investor demand.
At any time, the price of Bitcoin is determined by supply and demand. However, its supply is limited to 21 million, so demand is ultimately the driving force behind price trends. In other words, demand for Bitcoin needs to increase significantly for its price to reach $1 million, and demand needs to surge even further for the price of Bitcoin to reach $3.8 million. Bernstein and Ark Invest believe that this demand will come from spot Bitcoin ETFs, a new asset class approved earlier this year by the U.S. Securities and Exchange Commission (SEC). Spot Bitcoin ETFs track the price of Bitcoin by holding cryptocurrencies as underlying assets, eliminating traditional frictions that may keep retail and institutional investors away from the market.
Spot Bitcoin ETFs allow investors to increase their exposure to Bitcoin through their existing brokerage accounts. This eliminates the complexity of maintaining a separate investment portfolio using cryptocurrency exchanges. It also simplifies tax reporting because most brokerage firms link directly to tax preparation software.
In addition, spot Bitcoin ETFs are usually cheaper. iShares Bitcoin Trust has an expense ratio of 0.25%, which means that investors only need to pay $25 per year for every $10,000 invested. However, for orders below $10,000, Coinbase charges a fee of 0.4% to 0.6% per transaction, and investors have to pay this higher fee twice: once when buying and once when selling.
Bernstein and Ark Invest expect Bitcoin to follow different trajectories in the next decade, but they all agree that institutional investor demand will drive expected returns.
At any time, the price of Bitcoin is determined by supply and demand. However, its supply is limited to 21 million, so demand is ultimately the driving force behind price trends. In other words, the demand for Bitcoin needs to increase significantly for its price to reach $1 million, and for its price to reach $3.8 million, demand needs to further surge.
Bernstein and Ark Invest believe that the demand will come from spot Bitcoin ETFs, a new asset class approved earlier this year by the SEC. Spot Bitcoin ETFs track the price of Bitcoin by holding cryptocurrencies as underlying assets, eliminating traditional frictions that may keep retail and institutional investors away from the market.
Spot Bitcoin ETFs allow investors to increase their exposure to Bitcoin through their existing brokerage accounts. This eliminates the complexity of maintaining a separate investment portfolio using cryptocurrency exchanges. It also simplifies tax reporting because most brokerage firms link directly to tax preparation software.
In addition, spot bitcoin ETFs are usually cheaper. The expense ratio of iShares Bitcoin Trust is 0.25%, which means investors only need to pay $25 per year for every $0.01 million investment. But for orders below $0.01 million,$Coinbase (COIN.US)$For orders below $10000, there is a fee of 0.4% to 0.6% per transaction, and investors have to pay this higher fee twice - once when buying and again when selling.
Bernstein and Ark Invest expect Bitcoin to follow different trajectories in the next decade, but they all agree that institutional investor demand will drive expected returns.
The popularity of cryptos is still in its early stages, but it is evident in the 13F forms recently submitted to the SEC that institutions have an appetite for bitcoin spot ETFs. As mentioned above, the top three hedge funds - Citadel Advisors, D.E. Shaw, and Millennium Management - have started to build positions in the iShares Bitcoin Trust. Several major investment banks, including JPMorgan, Morgan Stanley, and Wells Fargo & Co., have also bought into the spot bitcoin ETF.
However, the majority of institutional investors currently have small positions, meaning their holdings are insignificant in their investment portfolios. But Bernstein analysts Chhugani and Sapra believe that institutional investors "are assessing 'net long' positions as they are pleased with the improvement in ETF liquidity".
Similarly, Wood believes that institutional investors will eventually place slightly more than 5% of their investment portfolios into the spot bitcoin ETF. As a background, institutional assets under management approached $120 trillion last year, so Ark Investment's forecast implies that these investors will allocate over $6 trillion to the bitcoin ETF in the future. Wood said that if this happens, the price of bitcoin could reach $3.8 million.
History shows that bitcoin will reach a new high between April and October 2025.
Bernstein is also bullish on bitcoin because of the halving event that occurred in April 2024. Analysts wrote in a recent report: "We believe the new cycle starting from halving is not a coincidence but driven by unique supply-demand dynamics."
Specifically, the bitcoin block subsidy - newly minted bitcoin awarded to miners for solving cryptographic puzzles to validate transaction blocks - decreases by 50% every 0.21 million blocks. This halving event occurs approximately every four years, with the most recent one happening in April.
This is significant, as bitcoin has experienced three halving events before, and its price has always reached a new peak 12 to 18 months later.
As shown above, the post-halving returns diminish with each subsequent halving event, simply because each halving has a smaller impact on the total supply. But history shows that bitcoin will reach a peak between April and October 2025.
Investors still need to be cautious.
Past performance is never a guarantee of future returns, and target prices should not be taken for granted. Bitcoin is a relatively new asset class, and its limited past records mean that predicting its performance is basically impossible.
In addition, bitcoin has fallen more than 50% on multiple occasions, and similar drops in the future are also possible.
Editor: Eason