With bitcoin (CRYPT: BTC) Now trading above $70,000, apparently the sky is the limit for how much higher the world's most popular cryptocurrency can go. The recent launch of new Bitcoin spot ETFs has sparked a huge amount of investor support for Bitcoin, and each day seems to bring with it the possibility of reaching a new all-time high.
So, it's perhaps no surprise that Ark Invest's Cathie Wood doubled down on her $1 million price prediction for Bitcoin. She is now very confident that Bitcoin will reach that level much sooner than the previously predicted date of 2030. If Bitcoin reaches $1 million, its price would have increased by a staggering 1,328%. So what has to go right for that to happen?
The new Bitcoin ETFs
The key factor, says Cathie Wood, has been the recent introduction of the new detect Bitcoin ETF. That immediately opened up the potential for anyone, from the smallest retail investor to the largest institutional investor, to invest in Bitcoin through a regulated and trusted investment product.
And, in fact, if you have followed the investment flows in these ETFs, the pace has been surprising. On a typical day, over $500 million can flow into these ETFs, helping to push up the price of Bitcoin.
In a period of just two months, Black Rock (NYSE: BLK)has become the largest public holder of Bitcoin in the world, thanks to the overwhelming success of its iShares Bitcoin Trust (NASDAQ:IBIT). BlackRock now owns 200,000 Bitcoins, worth approximately $14 billion at current prices. Ark Invest's new Bitcoin spot ETF is no slouch either, holding almost 40,000 Bitcoins.
Bitcoin Asset Allocation Combination
Given this huge institutional acceptance from Wall Street, portfolio strategists are now increasing their suggested Bitcoin asset allocations. Right now, the suggested Bitcoin allocation for investors ranges between 1% and 5%, with 3% starting to emerge as the new norm.
But some investment firms are now suggesting even larger Bitcoin allocations. Ark Invest, for example, suggests that the optimal Bitcoin allocation for a portfolio could be closer to 20%.
It's not hard to see how these increasing asset allocations will have a big impact on how much higher Bitcoin can go. When Ark Invest originally came up with its $1 million price prediction for Bitcoin, it was using a 6.5% asset allocation assumption. So keep an eye on how much top investors suggest be allocated to Bitcoin. The higher the percentage, the higher the value of Bitcoin.
What will be the impact of the Bitcoin halving?
The next big catalyst for Bitcoin will be the upcoming halving event, now scheduled for mid-April. According to conventional wisdom, the halving will cause Bitcoin to skyrocket even more. In three previous halving cycles (2012, 2016, and 2020), Bitcoin ultimately skyrocketed to a new all-time high, and that has made analysts increasingly optimistic about Bitcoin's price trajectory in 2024 and 2025. .
But not so fast, he says JPMorgan Chase: The Wall Street giant now predicts an imminent end to the โBitcoin halving-induced euphoria.โ
For one thing, the halving will likely cause a shakeup among major Bitcoin miners, who will see their mining rewards halved as a result of the halving. And second, major Wall Street firms may have already priced in much of the impact of the halving. If you believe in the Efficient Market Hypothesis (which says that all publicly available information is already included in the price of an asset), this makes a lot of sense.
As a result of all this, says JPMorgan Chase, the price of Bitcoin after the halving could fall to $42,000. That would be disastrous, of course, for anyone counting on Bitcoin allocations to rise above the 5% level. Who is going to want to accumulate Bitcoin if it is rapidly losing value?
In January, JPMorgan Chase CEO Jamie Dimon called Bitcoin a "pet stone" that "does nothing"," and that kind of bearish thinking could become the new norm.
How likely is it that the $1 million price target for Bitcoin will be reached?
Taken together, three things must go right for Bitcoin to reach that magical $1 million price level. Investors should continue moving money into new Bitcoin ETFs. Portfolio managers and investment strategists should continue to increase their suggested Bitcoin allocation percentages. And finally, the Bitcoin halving must occur again, just as it has in the previous three halving cycles.
Right now, all the lights are flashing green for Bitcoin. Investors like Cathie Wood look like geniuses right now, with their ultra-bullish Bitcoin calls. But remember: cryptocurrencies are an extremely volatile asset class, and it's unlikely that we'll go from $70,000 to $1 million without some dips and market corrections along the way.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Dominic Basulto has positions in Bitcoin. The Motley Fool holds and recommends Bitcoin and JPMorgan Chase. The Motley Fool has a disclosure policy.
1 of the Top Cryptocurrencies to Buy Before It Soars 1,328%, According to Cathie Wood of Ark Invest was originally published by The Motley Fool
