This Crypto ETF Could Soar 100% Next Year, According to Wall Street Investment Firm Bernstein
11/27/2024 19:05
Based on analysis from Wall Street investment firm Bernstein, the iShares Bitcoin Trust could soar another 100% in 2025. The iShares Bitcoin Trust, unlike traditional ETFs, only invests in a single asset: Bitcoin. This enables it to track the daily price of Bitcoin on a nearly 1:1 basis.
The launch of the new spot Bitcoin (CRYPTO: BTC) exchange-traded funds (ETFs) in January has arguably been the biggest story in the crypto market this year. These ETFs have powered Bitcoin to new all-time highs, with Bitcoin now close to breaking through the $100,000 level.
Leading the way has been the iShares Bitcoin Trust (NASDAQ: IBIT), which has more than $40 billion in assets under management. It's now up almost 100% for the year. And that might just be the start. Based on analysis from Wall Street investment firm Bernstein, the iShares Bitcoin Trust could soar another 100% in 2025. Let's take a closer look.
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The iShares Bitcoin Trust, unlike traditional ETFs, only invests in a single asset: Bitcoin. This enables it to track the daily price of Bitcoin on a nearly 1:1 basis. For example, if the price of Bitcoin goes up by 100%, then the price of the iShares Bitcoin Trust should also go up by 100%.
Thus, to figure out how high the iShares Bitcoin Trust could soar in 2025, all you need is a good Bitcoin forecast for the coming year. One of the best comes from Bernstein, which for almost six months has been predicting that Bitcoin could hit a price of $200,000 by the end of 2025. That forecast was made back when Bitcoin was still trading at about $67,000.
Unlike other Bitcoin price forecasts -- such as those calling for Bitcoin to blow past the $1 million price level -- this price prediction actually has some legs to it. Bernstein's analysis is based on a few key ideas, all of which are within the realm of possibility during the next 12 months.
One key idea is that investor inflows into the new spot Bitcoin ETFs will continue. This seems like a no-brainer.
Another key idea is that a new pro-crypto administration will take important steps to improve the regulatory environment for Bitcoin. This, too, seems to be within the realm of possibility, given that Donald Trump has pledged to make America the "crypto capital of the world."
Finally, there needs to be growing institutional and corporate adoption of Bitcoin. The poster child for this adoption, of course, is MicroStrategy Inc. (NASDAQ: MSTR), which has been on an absolutely epic Bitcoin buying spree. The company has now pledged to buy another $42 billion in Bitcoin during the next three years.
Also, the U.S. appears to be seriously contemplating the creation of a strategic Bitcoin reserve next year. Current plans call for this strategic Bitcoin reserve to buy 200,000 Bitcoins per year over a five-year period. That's a tremendous new source of buying pressure and could propel Bitcoin higher.
One way to stress-test this $200,000 price forecast is by looking at the options market. That's because, on Nov. 19, options on the iShares Bitcoin Trust began trading. More than $1.9 billion traded hands as traders raced to place their bets on the future price of the ETF. Overall, the sentiment was extremely bullish, with call options volume outpacing put options volume from bearish investors by more than 4:1.
On the very first day of trading, traders were actually buying $100 call options. Given that the price of the iShares Bitcoin Trust was then about $53, this implied that options traders expected the price of the ETF to nearly double in value within a very short period of time. At the time, the $100 call options implied a future price of $175,824 for Bitcoin.
It is unclear what impact this options trading on the iShares Bitcoin Trust is going to have on the price of Bitcoin. The current consensus is that it will lead to the potential for even more upside. This makes sense: More money sloshing around means the potential for an even bigger Bitcoin speculative frenzy.
Certainly, if the iShares Bitcoin Trust comes anywhere close to doubling in price next year, that would be impressive. But it might be disappointing for some Bitcoin bulls, who like to focus on multimillion-dollar price predictions. The most famous of these predictions, of course, is the $13 million price target set by Michael Saylor, founder and executive chairman of MicroStrategy.
But just keep in mind that the $13 million price prediction is for the year 2045, not the year 2025. If you do the math, that works out to a compound annual growth rate (CAGR) of about 25% to 30% per year. If Bitcoin can grow at that steady rate for the next two decades without taking any kind of breather whatsoever, then we might finally get to the mythical $13 million price 20 years from now.
I'm very bullish about Bitcoin headed into next year. As investment firm Bernstein pointed out, all the pieces seem to be coming together right now for another Bitcoin rally.
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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
This Crypto ETF Could Soar 100% Next Year, According to Wall Street Investment Firm Bernstein was originally published by The Motley Fool