Bitcoin (BTC -0.97%) has hit record highs this year, briefly reaching more than $120,000 as excitement around crypto reform has given investors plenty of reasons to be bullish on the top digital currency in the world. One of the ways to benefit from that surge has been through spot bitcoin exchange-traded funds (ETFs).

As Bitcoin has risen by 75% in value over the past 12 months, the iShares Bitcoin Trust ETF (IBIT -0.51%) is up by a similar amount. For investors who don't want to buy bitcoins directly, investing in the ETF has been a fairly good way to track the performance of the digital currency and profit from its gains.

But even despite these already significant returns, it may not necessarily be too late to invest in this scorching-hot fund.

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Many Bitcoin bulls believe there is much more upside

There's a lot of excitement around the blockchain and the potential for Bitcoin to revolutionize the global payments industry. Cathie Wood's company, Ark Invest, projects that Bitcoin prices could top $1.5 million by the end of the decade, and even under its bearish case, Wood's firm expects that it will rise to $300,000. Strategy Executive Chairman Michael Saylor believes that in the long run, the upside could be even greater, and that Bitcoin could reach a price of $13 million by 2045.

It all depends on how widely adopted Bitcoin will be in the long run. But with the U.S. government looking to set up a Bitcoin reserve, things do appear to be going in the right direction. If the U.S. government starts to load up on bitcoins, then the cryptocurrency may become even more prominent in investors' portfolios, driving up its value in the process.

Bitcoin comes with plenty of volatility and risk

Although Bitcoin is hot right now, it wasn't all that long ago that the cryptocurrency was in a free fall. In 2022, the digital currency plummeted by 65% as growth investors moved away from risky investments amid inflation and rising interest rates. It has been rallying lately due to the current U.S. administration's positive stance on crypto. However, if future administrations change their stances or regulations are put in place that stifle the digital currency's growth potential, it could affect its valuation. The future is always murky, especially in fairly new markets like the cryptocurrency sector.

There's also the possibility that as financial institutions get more involved with crypto, there will be other, safer, and less volatile ways to invest in other digital currencies besides Bitcoin. It's the most popular cryptocurrency today, but remaining that way in the future is by no means a certainty. Innovation can be dangerous to established leaders like Bitcoin.

There are some sky-high projections for Bitcoin that suggest a ton of upside, but they're also based on rosy projections, which may not necessarily pan out.

Should you add the iShares Bitcoin Trust ETF to your portfolio?

Bitcoin has soared by 70% since November 2024, as the U.S. election had an enormous effect on the cryptocurrency. That's impressive, but it also highlights just how dependent on and vulnerable it can be to government regulations. It also shows Bitcoin's sensitivity to just the expectation of what regulations may lie ahead for the industry.

However, if you're bullish on Bitcoin, have a high risk tolerance, and are comfortable with the volatility, the iShares Bitcoin Trust ETF can be a good investment, given how well it has tracked the digital currency in the past year. And you don't even have to step away from your stock brokerage to make these ETF trades.