Could This Exchange-Traded Fund (ETF) Be a Millionaire Maker?
Dominic Basulto, The Motley Fool
5 min read
The launch of the new spot Bitcoin(CRYPTO: BTC) ETFs in January was easily one of the biggest events of the year for the crypto market. As soon as these ETFs started trading, money began flooding into them as a way to get exposure to Bitcoin.
Thus far, the biggest standout among the nearly dozen new spot Bitcoin ETFs is the iShares Bitcoin Trust(NASDAQ: IBIT) from BlackRock. With more than $40 billion in assets under management, it is now considered the benchmark spot Bitcoin ETF.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
It is also the easiest way for the everyday investor to get exposure to Bitcoin. But is it a millionaire maker?
An ETF that tracks Bitcoin's price performance
The iShares Bitcoin Trust holds only a single asset: Bitcoin. Unlike traditional ETFs, which typically hold a diversified basket of stocks, this ETF makes no attempt to diversify away from Bitcoin. This might not be good news if you're looking for diversified exposure to the broader crypto market, but it's fantastic news if all you want is exposure to Bitcoin.
Holding only a single asset makes it possible for the iShares Bitcoin Trust to track the daily price of Bitcoin on a nearly 1:1 basis. And, indeed, if you look at a chart comparing the performance of the iShares Bitcoin Trust to the performance of Bitcoin, you'll see that it does an excellent job of tracking Bitcoin.
Of course, it's impossible to get perfect 1:1 tracking. Bitcoin trades globally, on a 24/7 basis, while Wall Street is only open for business during certain hours of the day and week. But the iShares Bitcoin Trust is arguably as close as you're going to get to 1:1 tracking of Bitcoin without buying it directly in the spot cryptocurrency market yourself.
This 1:1 tracking makes the iShares Bitcoin Trust a huge improvement over the previous iteration of Bitcoin ETFs, which relied on financial derivatives (such as forwards and futures) to track the price of Bitcoin. While these earlier Bitcoin ETFs came close to tracking Bitcoin's price over short intervals, they were prone to significant tracking error over the long-term.
Where does Bitcoin's price go from here?
Given that the iShares Bitcoin Trust does an excellent job of tracking the price of Bitcoin, the obvious question becomes: How much higher can Bitcoin go from here? After all, if you're really intent on becoming a crypto millionaire, then you need the price of Bitcoin to soar as high as possible, right?
The good news is that, according to a growing number of analysts and investors, Bitcoin's future price could reach stratospheric heights. For example, Cathie Wood of Ark Invest thinks that the price of Bitcoin could climb as high as $1 million by 2030. And, in a bullish case, Bitcoin might even reach $3.8 million. She's basing her price forecasts on assumptions about Bitcoin's growing adoption as a key part of the modern financial system.
Image source: Getty Images.
And, if you're feeling particularly bullish, consider the price prediction of Michael Saylor, founder and executive chairman of MicroStrategy. He's now predicting that Bitcoin could soar as high as $49 million per coin by the year 2045. In a base case, he says, Bitcoin could hit $13 million per coin.
Moreover, as we know from Bitcoin's historical track record, it has proven to have had plenty of upside potential in the past. Just over a decade ago, Bitcoin was trading for $100. Today, it trades for close to $100,000. For much of the past decade, Bitcoin has been one of the top-performing assets in the world, far ahead of many other asset classes.
Of course, past performance is no guarantee of future performance, but it gives you a good idea of why future Bitcoin price forecasts are so bullish.
Can you turn $1,000 into $1 million?
For the sake of argument, let's say that you have $1,000 that you're willing to invest into the iShares Bitcoin Trust. In order to become a crypto millionaire, you'd need to see a 1,000x return on your investment. To make the math easier, let's also assume that Bitcoin hits a price of $100,000 by the end of 2024.
In order to attain that 1,000x return on your money, you'd need to see the price of Bitcoin hit... (drumroll, please)... $100 million. That's highly improbable, given that even Michael Saylor of MicroStrategy is only predicting a price of $49 million in the most bullish of all possible future scenarios.
So you have two options if you're really focused on becoming a crypto millionaire. The first option is to increase your opening investment to, say, $100,000. That means Bitcoin would "only" need to hit a price of $1 million. The second option is to find another cryptocurrency with even more upside potential than Bitcoin over the next decade.
Bitcoin has enormous upside potential, but if you're counting on it to turn you into a millionaire, maybe you should keep your expectations in check.
Should you invest $1,000 in iShares Bitcoin Trust right now?
Before you buy stock in iShares Bitcoin Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and iShares Bitcoin Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $898,809!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
