Janice R. Andrews
Low interest rates usually lead to higher performance for riskier investments. As a result, the recent conjecture that sustained inflation may force Federal Reserve officials to lower interest rates more gradually than expected has been detrimental to cryptocurrencies. Despite its recent volatility, a number of Wall Street experts believe that patient investors in Bitcoin (CRYPTO: BTC) might see significant upside potential.
In March, the price of bitcoin hit a new all-time high of $73,000; however, it has since dropped 7% to $68,000. However, well-known analysts continue to be optimistic about Bitcoin’s future:
- Tom Lee, managing partner and Head of Research at Fundstrat Global Advisors, believes that Bitcoin may reach $150,000 by 2025 and $500,000 by 2029 due to a combination of recently authorized spot Bitcoin exchange-traded funds (ETFs), the recent halving of Bitcoin block subsidies, and the eventual loosening of monetary policy. This estimate suggests a price rise of 635% above its present value.
- Anthony Scaramucci, partner and creator of SkyBridge Capital, stated to CNBC that spot Bitcoin exchange-traded funds (ETFs) have the potential to push Bitcoin’s market capitalization over that of gold, which is presently valued at around $16 trillion. A single Bitcoin may be worth over $800,000 in this case, which would represent an increase of almost 1,075% over its current value.
- Cathie Wood, the CEO and CIO of Ark Invest, predicts that the price of Bitcoin will reach $3.8 million as spot Bitcoin ETFs finally take up around 5% of institutional assets under management. By comparison, this estimate indicates a staggering 5,480% price rise.
Given the substantial upside potential indicated by these analysts, Bitcoin continues to be an intriguing investment, even though investors should proceed with care and not put too much faith in these price estimates. What investors should know is as follows.
The Bitcoin Investment Thesis
The basic forces of supply and demand determine the price of bitcoin. The crucial factor now is demand because there is a limit of 21 million coins available. The trajectory of Bitcoin’s price in the future will be determined by how much demand rises or falls from its current level.
The demand in the upcoming months and years may be greatly increased by two recent developments. First, in January 2024, spot Bitcoin ETFs were approved by the Securities and Exchange Commission (SEC). Second, in April 2024, the Bitcoin block subsidy was cut in half.
Institutional Investors May Be Drawn to Spot Bitcoin ETFs
Spot Bitcoin ETFs remove the requirement for investors to open new accounts with cryptocurrency exchanges by providing them with direct exposure to Bitcoin through existing brokerage accounts. Furthermore, although yearly costs indicated as an expense ratio are imposed by spot Bitcoin ETFs, these fees are often less than those imposed by bitcoin exchanges for transactions.
Spot Bitcoin ETFs, in short, lower barriers to entry for institutional and individual investors alike. PwC projects that by 2025, institutional investors—which comprise professional money managers including family offices, endowments, hedge funds, insurance firms, and investment banks—will be managing assets valued at $145 trillion. A tiny portion of these assets invested in Bitcoin can result in a sharp increase in price.
Spot Bitcoin ETFs are expected to hold more than 5% of institutional assets under management, or over $8 trillion based on PwC’s estimate, according to Ark Invest. The majority of the $57 billion in assets held by spot Bitcoin ETFs come from individual investors. Though the early results are encouraging, U.S. authorities just approved these ETFs in January. More assets were accumulated in the first 50 days of the BlackRock iShares Bitcoin Trust (NASDAQ: IBIT) and the Fidelity Wise Origin Bitcoin Trust (NYSEMKT: FBTC) than in the history of exchange-traded funds (ETFs).
Furthermore, several hundred institutional investors, including well-known banks like JPMorgan Chase, U.S. Bank, and Wells Fargo as well as successful hedge funds like Citadel, D.E. Shaw, and Millennium Management, have bought positions in different spot Bitcoin ETFs, according to Form 13Fs filed for the first quarter of 2024.
The Bitcoin Block Subsidies Shall Be Halved to Lessen Miners’ Pressure to Sell
Block rewards, or block subsidies and transaction fees combined, are how bitcoin miners make money. Newly created Bitcoins known as block subsidies are cut in half every 210,000 blocks, or roughly every four years. April 2024 saw the most recent halving event, which decreased the block subsidy from 6.25 BTC to 3.125 BTC. This lessening of selling pressure is comparable to a rise in demand, which has historically resulted in a notable gain in price.
Historical Comebacks After Events of Halving:
- 2,964% as of November 2012.
- July 2016: 922%
- 348% as of May 2020
Is Investing in Bitcoin a Good Idea?
Given the potential for significant price volatility, investors who can tolerate a little amount of risk should think about acquiring a tiny stake in Bitcoin now. It is crucial to hold onto Bitcoin for the long term, even during market fluctuations.
Even while there is no assurance that Bitcoin will hit the stated price objectives, it may still be a useful addition to a portfolio that is well-diversified.
Is It Time to Put $1,000 Into Bitcoin?
Think about this before making a Bitcoin investment: Bitcoin was not included in the list of the top 10 stocks that the Motley Fool Stock Advisor analysis team just determined were the best stocks for investors to purchase right now. In the upcoming years, these equities have the potential to yield significant profits.
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