With Bitcoin (BTC +0.42%) now trading above $70,000, the sky's apparently the limit for just how much higher the world's most popular cryptocurrency can go. The recent launch of the new spot Bitcoin ETFs has led to an outpouring of investor support for Bitcoin, and every day seems to bring the potential for a new all-time-high.
So it's perhaps no surprise that Cathie Wood of Ark Invest has doubled down on her $1 million price prediction for Bitcoin. She's now highly confident that Bitcoin will hit that level well before her earlier predicted date of 2030. If Bitcoin does reach $1 million, it would have increased in price by a staggering 1,328%. So what needs to go right for that to happen?
The new Bitcoin ETFs
The key driving factor, says Cathie Wood, has been the recent introduction of the new spot Bitcoin ETFs. That immediately unlocked the potential for anyone -- from the smallest retail investor to the largest institutional investor -- to invest in Bitcoin via a trusted, regulated investment product.
Image source: Getty Images.
And indeed, if you have been tracking the investment flows into these ETFs, the pace has been astonishing. On an average day, more than $500 million can flow into these ETFs, helping to push up the price of Bitcoin.
In a span of just two months, BlackRock (BLK +0.00%), has become the largest public holder of Bitcoin in the world, thanks to the runaway success of its iShares Bitcoin Trust (IBIT +1.59%). BlackRock now holds 200,000 Bitcoins, worth roughly $14 billion at today's prices. Ark Invest's new spot Bitcoin ETF is no slouch either, holding nearly 40,000 Bitcoins.
Bitcoin's asset allocation mix
Given this huge institutional buy-in from Wall Street, portfolio strategists are now ratcheting up their suggested Bitcoin asset allocations. Right now, the suggested Bitcoin allocation for investors ranges from 1% to 5%, with 3% starting to emerge as the new norm.
But some investment firms are now suggesting even higher Bitcoin allocations. Ark Invest, for example, suggests that the optimal Bitcoin allocation for a portfolio could be closer to 20%.
CRYPTO: BTC
Key Data Points
It's not hard to see how these increasing asset allocations will have a huge impact on just how much higher Bitcoin can go. When Ark Invest originally came up with its $1 million price prediction for Bitcoin, it was using an asset allocation assumption of 6.5%. So keep a close eye on just how much top investors are suggesting you allocate to Bitcoin. The higher the percentage, the higher Bitcoin is going to go.
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 send Bitcoin skyrocketing even higher. In three previous halving cycles (2012, 2016, and 2020), Bitcoin eventually soared to a new all-time-high, and that has made analysts increasingly bullish about Bitcoin's price trajectory in 2024 and 2025.
But not so fast, says JPMorgan Chase: The Wall Street giant is now predicting an imminent end to "Bitcoin-halving-induced euphoria."
For one, the halving will likely lead to a shakeout among the top Bitcoin miners, who will see their mining rewards slashed by one-half as a result of the halving. And secondly, much of the impact of the halving may already be priced in by top Wall Street firms. 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 tick up past the 5% level. Who's going to want to load up on Bitcoin if it's rapidly losing value?
In January, JPMorgan Chase CEO Jamie Dimon called Bitcoin a "pet rock" that "does nothing," and that type of bearish thinking might become the new norm.
How likely is the $1 million price target for Bitcoin?
Putting it all together, three things need to go right for Bitcoin to hit that magical $1 million price level. Investors need to keep moving money into the new Bitcoin ETFs. Portfolio managers and investment strategists need to keep ratcheting up their suggested Bitcoin allocation percentages. And finally, the Bitcoin halving needs to come through again, just like it has in three previous halving cycles.
Right now, all lights are flashing green for Bitcoin. Investors like Cathie Wood are looking like geniuses right now, with their ultra-bullish Bitcoin calls. But just remember: Crypto is an extremely volatile asset class, and it's unlikely that we're going to go from $70,000 to $1 million without a few downturns and market corrections along the way.
