Could this exchange-traded fund (ETF) become a millionaire?

The launch of the new spot Bitcoin (CRYPTO:BTC) ETFs in January were undoubtedly one of the most important events of the year for the crypto market. As soon as these ETFs began trading, money began flowing into them in order to gain exposure to Bitcoin.

So far, the most notable among the dozen new spot Bitcoin ETFs is the iShares Bitcoin Trust (NASDAQ:IBIT) Since black rock. With more than $40 billion in assets under management, it is now considered THE Benchmark Bitcoin Spot ETF.

It is also the easiest way for the everyday investor to gain exposure to Bitcoin. But is he a millionaire designer?

An ETF that tracks the price movement of Bitcoin

The iShares Bitcoin Trust only holds one asset: Bitcoin. Unlike traditional ETFs, which typically hold a diversified basket of stocks, this ETF does not attempt to diversify outside of Bitcoin. This may 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 a single asset allows the iShares Bitcoin Trust to track the daily price of Bitcoin on a near 1:1 basis. And, indeed, if you look at a chart comparing the performance of the iShares Bitcoin Trust to Bitcoin, you’ll see that it does an excellent job of tracking Bitcoin.

Bitcoin/US Dollar Chart by TradingView

Of course, it’s impossible to achieve perfect 1:1 tracking. Bitcoin trades globally, 24/7, while Wall Street is only open for business during certain times of the day and week. But the iShares Bitcoin Trust is arguably as close as you’ll get to getting 1:1 tracking of Bitcoin without buying it yourself directly on the cryptocurrency spot market.

This 1:1 tracking makes iShares Bitcoin Trust a huge improvement over the previous iteration of Bitcoin ETFs, which relied on financial derivatives (such as futures and futures) to track the price of Bitcoin . Although these early Bitcoin ETFs were close to tracking the price of Bitcoin over short intervals, they were subject to significant tracking errors over the long term.

Where does the Bitcoin price go from here?

Since 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 really intend to become a crypto-millionaire, then you need the price of Bitcoin to skyrocket as high as possible, right?

The good news is that, according to a growing number of analysts and investors, the future price of Bitcoin could reach stratospheric heights. For example, Cathie Wood of Ark Invest believes that the price of Bitcoin could rise to $1 million by 2030. And, in a bullish scenario, Bitcoin could even reach $3.8 million. It bases its price predictions on assumptions regarding the growing adoption of Bitcoin as a key part of the modern financial system.

Image source: Getty Images.

And if you’re feeling particularly optimistic, consider price predictions from Michael Saylor, founder and executive chairman of MicroStrategy. He now predicts that Bitcoin could reach $49 million per coin by 2045. In a base case scenario, he says, Bitcoin could reach $13 million per coin.

Additionally, as we know from Bitcoin’s historical track record, it has proven to have significant upside potential in the past. A little over ten years ago, Bitcoin was trading at $100. Today it is trading at almost $100,000. For much of the last decade, Bitcoin has been one of the best 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 Bitcoin’s future price predictions are so bullish.

Can you turn $1,000 into $1 million?

For argument’s sake, let’s say you have $1,000 that you’re willing to invest in iShares Bitcoin Trust. To become a crypto millionaire, you need to get a 1000x return on your investment. For ease of calculation, let’s also assume that Bitcoin reaches a price of $100,000 by the end of 2024.

In order to achieve that 1,000x ROI, you would need to see the price of Bitcoin reach…(drumroll, please)…$100 million. This is highly unlikely, given that even MicroStrategy’s Michael Saylor only predicts a price tag of $49 million in the most optimistic scenario of all possible futures.

So you have two options if you really want to become a crypto millionaire. The first option is to increase your opening investment to, say, $100,000. This means that Bitcoin would “only” need to reach a price of $1 million. The second option is to find another cryptocurrency with even greater upside potential than Bitcoin over the next decade.

Bitcoin has huge upside potential, but if you’re counting on it becoming a millionaire, you might want to keep your expectations in check.

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Dominic Basulto has positions in Bitcoin. The Motley Fool posts and recommends Bitcoin. The Motley Fool has a disclosure policy.