Select Wall Street analysts see substantial upside in Bitcoin. Whether their estimates are correct or not, the cryptocurrency is a worthwhile investment for risk-tolerant investors.
Bitcoin (BTC 0.25%) gained 116% over the past year amid a resurgence in risk assets driven by an increasingly optimistic economic outlook. Other factors contributing to those returns include the recent approval of spot Bitcoin ETFs and the upcoming halving of Bitcoin mining rewards, estimated to occur on April 16, 2024.
Several Wall Street analysts think those factors will drive the cryptocurrency even higher in the future, but Anthony Scaramucci, Tom Lee, and Cathie Wood are among the most bullish. Their forecasts imply upside ranging from 525% to 5,800% from the current price of $64,000.
The two catalysts that could drive Bitcoin higher
Recently approved spot Bitcoin ETFs offer direct exposure to Bitcoin without the friction of cryptocurrency exchanges. That could be a game changer. By letting investors consolidate accounts (i.e., no separate accounts for cryptocurrency) and eliminating high transaction fees, spot Bitcoin ETFs could greatly increase demand.
Meanwhile, Bitcoin mining rewards will be reduced by 50% in April 2024. Halving events are coded into the blockchain protocol to ensure Bitcoin supply never exceeds 21 million, and they occur about once every four years. The upshot is that, by cutting issuance in half, the event will leave miners with 50% less Bitcoin to sell over the next four years, thereby diminishing selling pressure.
Anthony Scaramucci: $400,000 per Bitcoin (525% upside)
Anthony Scaramucci is the founder and managing partner at SkyBridge Capital, an alternative asset manager that specializes in hedge funds, digital assets, private equity, and real estate. Scaramucci was an early investor in the iShares Bitcoin ETF by BlackRock, and he made a few interesting comments during an interview with YouTube host Scott Melker earlier this year.
When questioned about his prediction that Bitcoin could exceed $170,000 by 2025, Scaramucci called it a data-dependent estimate based on Bitcoin consistently quadrupling during the 18-month period following halving events. Reuters quoted a similar comment from Scaramucci ahead of the World Economic Forum’s meeting in January. “Whatever the price is on the day of the halving in April, multiply it by four, and it’ll reach that price in the next 18 months.”
Bitcoin is now worth $64,000, bringing Scaramucci’s 18-month forecast to $256,000. Interestingly, there is a precedent for large price increases during the 18 months after halving events.
|
Bitcoin Halving |
Price (at Halving) |
Price (18 Months Later) |
Return |
|---|---|---|---|
|
November 28, 2012 |
$13 |
$572 |
4,300% |
|
July 9, 2016 |
$647 |
$14,919 |
2,205% |
|
May 11, 2020 |
$8,821 |
$65,061 |
638% |
Data source: StatMuse, YCharts. Note: Bitcoin prices have been rounded to the nearest dollar.
Scaramucci also told Melker, “My long-term price target is that Bitcoin gets to easily half of the market capitalization of gold.” Gold had a market capitalization of $14.5 trillion at the time, so Bitcoin could eventually have a market capitalization of $7 trillion to $8 trillion, according to Scaramucci. That would bring the price to $400,000, implying 525% upside.
Scaramucci concluded by saying, “It would be ridiculous for people not to understand the asset, not to understand the dynamics of it as a store of value, and not to have a position.”
Tom Lee: $500,000 per Bitcoin (681% upside)
Tom Lee is a managing partner and the Head of Research at Fundstrat Global Advisors, a research company that provides insight to institutional investors, wealth advisors, pension funds, family offices, and high-net-worth individuals. Previously, Lee served as chief equity strategist at JPMorgan Chase between 2007 and 2014.
Speaking on CNBC’s Squawk Box, Lee recently said Bitcoin could hit $150,000 this year and $500,000 within five years. He pointed to several catalysts to explain his estimate. “You’ve got demand improving with the [spot Bitcoin] ETF, you have the supply shrinking with the halving, and if monetary policy eases, which we expect, you know that’s supportive of risk assets,” Lee said.
Lee is not alone in thinking Bitcoin can reach $500,000 in the future, a forecast that implies 681% upside from its current price. In 2022, MicroStrategy CEO Michael Saylor said the cryptocurrency could reach half a million in the next decade.
Cathie Wood: $3.8 million per Bitcoin (5,800% upside)
Cathie Wood is the CEO and Chief Investment Officer at Ark Invest, an asset manager focused on disruptive innovation. Last year, Ark published a valuation model that priced Bitcoin near $1.5 million by 2030. The firm updated its estimate following the approval of spot Bitcoin ETFs earlier this year. Wood shed some light on the new outlook at the Bitcoin Investor Day conference last month.
“The analysis we’ve done is that if institutional investors were to allocate a little more than 5% of their portfolios to Bitcoin, as we think they will over time, that alone would add $2.3 million to the projection I just gave you,” Wood said. In short, Ark believes Bitcoin could reach $3.8 million ($1.5 million plus $2.3 million) as institutions invest in the cryptocurrency, and the firm believes spot Bitcoin ETFs will drive those investments. That estimate implies more than 5,800% upside.
Consultancy PwC says institutional assets under management (AUM) will reach $145 trillion by 2025. Using that number, Ark’s model suggests that spot Bitcoin ETFs will capture $8 trillion in institutional assets at some point in the future. That might take a while. Spot Bitcoin ETFs have $56 billion in AUM, but 90% of inflows have come from retail investors. That leaves $6 billion in AUM attributable to institutions, so they would need to up their Bitcoin allocation 1,333-fold to hit Ark’s threshold.
Investors should focus on facts, not forecasts
Anchoring to forecasts is dangerous. There is absolutely no guarantee Bitcoin moves one penny higher from where it currently trades. However, Bitcoin has outperformed virtually every asset class over the last five years, and the catalysts I discussed could certainly drive its price higher over the next five.
Indeed, the recent launch of spot Bitcoin ETFs has already been a monumental success. The funds issued by BlackRock and Fidelity saw more inflows during their first month of trading than any ETFs in history, according to Eric Balchunas at Bloomberg. And the iShares Bitcoin ETF by BlackRock reached $10 billion in assets faster than any ETF in history, according to The Wall Street Journal.
Here’s the bottom line: Cryptocurrencies are volatile and there is no guarantee any of them will be worth more in the future. But I think patient investors comfortable with risk should allocate a percentage of their portfolios to Bitcoin. Ark Invest recently published a Sharpe Ratio analysis suggesting an allocation of 19.4% was optimal last year, but I would limit exposure to 5%.
