1 unstoppable cryptocurrency to buy before it surges 1,120%, according to this Wall Street analyst

Wall Street analysts don't always get everything right, but some have such a strong track record that it's worth paying attention when making their forecasts. Tom Lee is co-founder and head of research at Fundstrat, a Wall Street advisory firm focused on stocks and financial investments.

In 2013, Lee predicted this Dow Jones Industrial Average would reach 20,000 within four years. Lo and behold, this level was exceeded at the beginning of 2017. Lee was also the most optimistic S&P 500 Target on Wall Street in 2023, although many analysts fear a recession and falling stock prices. He estimated the index would end the year at 4,750, and it closed at 4,769.

Lee remains bullish on the world's largest cryptocurrency. Bitcoin (BTC 2.76%), for years. But he just made a new prediction: that the token could rise 1,120% within the next five years.

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Bitcoin is still recovering from a sharp loss in 2022

The cryptocurrency industry is still recovering from a brutal crash that catapulted Bitcoin from an all-time high of $69,000 in 2021 to just $16,256 towards the end of 2022.

The industry was thrown into turmoil in 2022 due to a series of high-profile collapses. Centralized crypto exchange FTX was shut down when its founder, Sam Bankman-Fried, was caught committing fraud and bilking customers and investors of $8 billion. Shortly before stablecoin Terra USD lost its bond, resulting in a $60 billion loss in value.

Investors quickly lost faith in cryptocurrencies, particularly because they had little traction as a payment mechanism in the real world. Today, only 9,393 merchants worldwide accept Bitcoin in exchange for goods and services.

Centralized exchanges continued to struggle with legal issues in 2023, with the head of the crypto exchange feared Binance forced to resign over his breaches of anti-money laundering regulations. He is currently awaiting trial.

Ironically, these high-profile shutdowns have given investors more confidence in the cryptocurrency industry. Aggressive regulatory measures deter bad actors and legitimize the industry. Combined with a risk-on sentiment in financial assets like stocks in 2023, Bitcoin has made up a lot of lost ground.

The token has risen more than 150% in 2023 and is currently trading at around $39,000, although that is still far from its all-time high of $69,000.

A new source of demand is Bitcoin exchange-traded funds

The US Securities and Exchange Commission (SEC) approved 11 Bitcoin exchange-traded funds (ETFs) earlier this month, giving investors a new way to buy the token – and that's a big reason why Tom Lee is so bullish .

Managed by professionals, an ETF is designed to hold underlying assets (like stocks, bonds, or in this case Bitcoin) and bundle them into one security for investors to buy or sell. Before the approval of a Bitcoin ETF, it was difficult for financial advisors and institutions to own the token due to its risk profile. Volatility aside, the buyer had to carefully secure their Bitcoin in a digital wallet or cold storage (e.g. a USB stick locked in a safe). There was no insurance or rescue in case the tokens were stolen.

Now a financial advisor can easily purchase an ETF for their clients without having to worry about storing Bitcoin. This responsibility lies with the manager of the fund; BlackRockArk Investment Management and Fidelity are just a few of Wall Street's notable asset managers with an approved Bitcoin ETF.

Of course it comes with costs. An ETF charges an annual fee ranging from 0.2% to 1.5% of the total value of the Bitcoins it holds, which can reduce returns in the long term.

However, according to Bitcoin, the ETF could generate $50 billion to $100 billion in new demand within the first year Standard Chartered. That could drive up the price of Bitcoin as asset managers buy up tokens for their ETFs.

Tom Lee believes Bitcoin could rise to $500,000 in five years

Bitcoin is a finite resource, similar to gold. Its source code limits its maximum supply to 21 million tokens, the last of which is expected to be mined in 2140. In theory, the price should increase gradually as long as there is demand.

Tom Lee believes ETF demand could push Bitcoin to $150,000 per token this year. But he predicts it could rise to $500,000 per token within five years, an increase of more than 1,120%.

Is this realistic? Bitcoin currently has a total market cap of $770 billion, so a 1,120% increase would push that number to nearly $9 trillion. For context: Apple is the largest company in the world, valued at just $3 trillion. It sells tangible goods and services that generate significant sales and income and form the basis of the company's value. Bitcoin, on the other hand, produces nothing tangible, making it very difficult to determine real value.

The total value of all gold reserves is estimated at $13.6 trillion, and that might be a better comparison to Bitcoin's potential. Still, gold can be physically owned, which is a useful property in the event of an economic or social crisis.

Bitcoin could well reach Lee's goal of $500,000 by 2029, but investors should always be cautious about speculative assets like cryptocurrencies.

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