Bernstein analysts led by Gautam Chhugani predicted Bitcoin(CRYPTO: BTC) would reach $90,000 if former President Donald Trump won his bid for a second term. Lo and behold, a week after the votes were counted and Trump declared the winner of the U.S. presidential election, Bitcoin hit $90,000 for the first time.
However, Bernstein expects more upside. Chhugani and his team believe Bitcoin is on the brink of a multiyear breakout that could carry its price to $500,000 by 2029, which implies 450% upside from its current price of $90,000. Also, it implies equivalent upside in the iShares Bitcoin Trust(NASDAQ: IBIT), an index fund that tracks the price of Bitcoin.
That optimism is partly due to expectations that the Trump administration will usher in pro-cryptocurrency policy changes, including the creation of a strategic Bitcoin reserve. But more important, Bernstein believes spot Bitcoin ETFs will bring more institutional investors to the market. Price targets should always be treated skeptically, but those are valid reasons for buying a position in the iShares Bitcoin Trust.
Here are the important details.
Spot Bitcoin ETFs have been the most successful ETF launch in history
Spot Bitcoin ETFs hit the market following SEC approval in January 2024. Collectively, they have accumulated more than $28 billion in net inflows in 10 months, making the event the most successful ETF launch on record, according to Gautam Chhugani at Bernstein.
Importantly, the iShares Bitcoin Trust has been the most successful of the bunch. Its asset value hit $10 billion in two months due to a combination of low fees and the good reputation of its issuer BlackRock, the largest asset manager in the world. No ETF has ever reached that threshold more quickly, according to The Wall Street Journal.
The bull case is simple: Bitcoin's price depends on supply and demand, but demand is the most consequential variable because supply is fixed at 21 million coins. And spot Bitcoin ETFs could boost demand by reducing friction. They let investors add Bitcoin exposure to existing brokerage accounts, which is easier and generally cheaper than transacting through a separate cryptocurrency exchange account.
One particularly important tenet of Bernstein's investment thesis is that spot Bitcoin ETFs will bring more institutional money to the market. Institutional investors have $120 trillion in assets under management, and even a small fraction of that sum allocated to Bitcoin could drive its price much higher. We are in the earliest stages of adoption, but things are moving in the right direction. Certain fund managers have been buying the iShares Bitcoin Trust.
Bitcoin could become a more common treasury asset during a second Trump administration
Spot Bitcoin ETFs could make Bitcoin a more popular corporate treasury asset. Of course, MicroStrategy already owns 279,420 BTC, which is currently worth about $25 billion, but most companies have yet to add Bitcoin to their balance sheets. That could change given that President-elect Donald Trump is expected to bring about crypto-friendly policy changes.
Most important, Trump has suggested making Bitcoin a reserve asset, and Senator Cynthia Lummis (R-Wyo.) has introduced relevant legislation. The Bitcoin Act of 2024 proposes moving the 207,000 BTC owned by the U.S government to the Treasury, and it requires the Secretary of the Treasury to purchase 1 million BTC over a five-year period.
At this point, the expert consensus is Bitcoin stands only a slim chance of becoming a reserve asset in the near term. "I think it's a low probability," Mike Novogratz, CEO of Galaxy Digital, told Bloomberg in a recent interview. "While the Republicans control the senate, they don't have close to 60 seats." Even so, most experts think the odds are better under a Trump Administration that they otherwise would have been had Kamala Harris won the election.
Here's the bottom line: Spot Bitcoin ETFs could drive adoption among retail and institutional investors, and they could encourage more companies to use Bitcoin as a treasury asset. Meanwhile, the U.S. government may create a strategic Bitcoin reserve under Trump. And all of those potential sources of demand could lead to significant price appreciation in the coming years, perhaps pushing Bitcoin to $500,000 by 2029.
Image source: Getty Images.
History says Bitcoin will probably suffer a substantial decline in the future
Bitcoin's price has surged 30% since Donald Trump won the U.S. presidential election, but investors should bear in mind that the cryptocurrency has declined sharply on multiple occasions in the past. In fact, Bitcoin has fallen more than 30% from a record high six times in the last decade, and it often took at least a year for its price to rebound. Similar volatility is probable in the future.
Investors that are uncomfortable with the idea of a 30%-plus decline should steer clear of Bitcoin and spot Bitcoin ETFs. But investors that can tolerate that kind of volatility should consider adding Bitcoin exposure to their portfolio, and the iShares Bitcoin Trust is an easy way to make that happen.
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Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
