The hedge funds listed above have just 0.1% to 0.2% of their equity portfolios invested in the iShares Bitcoin Trust. They also hold other Bitcoin-related investments, including other spot Bitcoin ETFs. Still, they represent some of the biggest early investors.

Cathie Wood, the Bernstein analysts, and others expect institutional investors to hold at least 1% of their portfolio in Bitcoin or Bitcoin ETFs eventually. That adoption among big money will drive the price of Bitcoin higher due to its limited supply capacity.

The cost of Bitcoin mining will push prices higher

Another factor that could push pricing higher is the increasing cost of mining Bitcoin. The cost to mine Bitcoin is largely a factor of how many miners are participating in the activity. As demand drives the price higher, it increases competition for mining the next block, which makes it more expensive to do. The market creates an equilibrium over time with some miners dropping out as the cost of mining isn't worth the payoff, but ultimately prices will land above the marginal cost of production for Bitcoin.

When Bitcoin undergoes a halving, it reduces the award miners receive for each block they confirm on the Bitcoin blockchain. That means supply grows more slowly, but demand doesn't change. At the same time, miners exhibit less selling pressure in the market. Those two factors typically lead to higher prices over time, as Bitcoin undergoes halvings once every four years or so. The next Bitcoin halving will take place in early 2028, and another will occur in 2032.

Overall, Bernstein analysts expect Bitcoin to trade for about 1.5 times the marginal cost of production. That puts its base case at $200,000 for next year. But as production costs increase, the analysts see the price soaring to $500,000 by 2029 and $1 million by 2033.

Is $1 million really possible?

The above analysts calls for a $1 million Bitcoin in just a few years are based on fundamental analysis. This is the real deal. But it's important to note they make a lot of educated guesses, and those guesses could turn out to be dead wrong.

Bitcoin is an extremely volatile asset with limited intrinsic value, especially when you consider the utility of newer cryptocurrencies that improve upon the foundational blockchain technology. As such, it could easily become nearly worthless over time if the above thesis doesn't hold true.

That said, the analysts appear to be directionally accurate. The future looks bright for Bitcoin, whether or not it reaches $1 million by 2030. It may be worth putting a small amount of your portfolio in the asset class, either directly or through a spot Bitcoin ETF like the iShares Bitcoin Trust.

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Adam Levy has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

Billionaires Are Piling Into an Index Fund That Could Soar Up to 1,207% by 2030, According to Wall Street Experts was originally published by The Motley Fool