Bernstein analysts believe that Bitcoin will reach $1 million by 2033.

Bitcoin (Bitcoin 0.51%) returned 150% last year, easily outpacing the US stock market. But Bernstein analysts Gautam Chhugani and Mahika Sapra expect the cryptocurrency to soar 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 (implied 202% advantage)
• 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, demand for Bitcoin among institutional investors is trending to increase due to the recent approval of spot Bitcoin ETFs. Secondly, the supply of Bitcoin is limited to 21 million coins through periodic halving events.

Here’s what investors should know about Bitcoin.

Spot Bitcoin ETFs have already boosted demand among institutional investors

The SEC approved 11 Spot Bitcoin ETF registrations in January 2024. This was a huge development for two reasons. First, Bitcoin it now has the regulatory seal of approval, which legitimizes cryptocurrency as an institutional asset. Second, spot Bitcoin ETFs provide direct exposure to Bitcoin without the complexities of cryptocurrency exchanges and generally cost less.

For example, the iShares Bitcoin Trust (I BITE -3.53%) has a Expense Ratio of 0.25%, meaning the annual fee on a $10,000 portfolio would total $25. Coinbase Global charges up to 0.6% per trade, meaning a $10,000 trade could cost $60.

Collectively, this value proposition is resonating with the market. In truth, Black stoneiShares Bitcoin Trust and Fidelity Wise Origin Bitcoin Trust (FBTC -3.48%) accumulated more assets in its 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.

Also worth noting, according to 13F Forms 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. Included in these numbers are 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 US-regulated ETFs were the game changer for crypto, which brought structural demand from traditional pools of capital.”

Bitcoin halving events have been consistently followed by price appreciation

Bitcoin is like other assets because its price is determined by supply and demand. But unlike most assets, demand is the most important variable because the supply of Bitcoin is fixed. Periodical halving events are the mechanism by which the 21 million coin supply limit is enforced.

To elaborate, Bitcoin mining subsidies – newly minted Bitcoin granted to miners who validate successfully one transaction block – decreases by 50% each time 210,000 blocks are added to the blockchain. Halving events occur once every four years and 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

Half price

Price in the next half

Turn back

Data source: Morgan Stanley, YCharts.

The most recent halving event occurred on April 19, 2024, when Bitcoin traded at $63,462. As shown above, history says that Bitcoin will be worth more in the next halving event in 2028. The chart also shows that the return has decreased with each subsequent halving event, so the advantage 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 in newly minted Bitcoin was 25 BTC per block. This halving event impacted supply more deeply than the next halving event when the block subsidy was reduced from 25 BTC to 12.5 BTC in 2016.

With that in mind, the most recent halving event – ​​which reduced 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 over 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 who think Bitcoin is heading towards $1 million. Katie Wood recently said its price could reach $3.8 million if institutional investors allocated just over 5% of their assets to spot Bitcoin ETFs, as she believes they will.

However, while it’s fun to consider price targets, 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 optimistic, but there are also reasons to be cautious. Bitcoin fell 75% between November 2021 and November 2022, and a similar decline is possible (or even likely) in the future.

Investors who find this idea intolerable should avoid Bitcoin. But investors comfortable with this level of volatility should consider buying a position in Bitcoin (or a spot Bitcoin ETF) today.

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