by 
Artificial intelligence (AI) has been one of the hottest investment themes on Wall Street this year, and Nvidia (NASDAQ: NVDA) has become the go-to AI stock because of its leadership in machine learning processors. But some Wall Street analysts see a substantial opportunity around it Bitcoin (CRYPTO: BTC) due to the recent approval of Bitcoin cash ETFs.
-
Bernstein’s Gautam Chhugani and Mahika Sapra estimate that Bitcoin could hit $200,000 by 2025, $500,000 by 2029, and $1 million by 2030. This forecast ultimately implies a 1,415% increase from its current price of $66,000.
-
Last year, Cathie Wood estimated that Bitcoin could reach $1.5 million by 2030, but she increased that figure to $3.8 million after the approval of Bitcoin spot ETFs. Her latest forecast implies a 5,655% increase from the current price.
Several successful hedge fund managers sold shares of Nvidia during the first quarter, while simultaneously buying shares of the company. iShares Bitcoin Trust Fund (NASDAQ: IBIT), one of the recently approved Bitcoin spot ETFs.
-
Citadel Advisors’ Ken Griffin sold 2.4 million shares of Nvidia in the first quarter, reducing his stake by 68%. In the meantime, he opened a small position in the iShares Bitcoin Trust.
-
DE Shaw’s David Shaw sold 1.4 million shares of Nvidia in the first quarter, reducing his stake by 38%. In the meantime, he opened a small position in the iShares Bitcoin Trust.
-
Millennium Management’s Israel Englander sold 720,004 shares of Nvidia in the first quarter, reducing his stake by 35%. In the meantime, he took a sizable position in the iShares Bitcoin Trust, which ranks twelfth among his holdings excluding options contracts.
The three billionaires mentioned above are notable because they run the three largest hedge funds by net gains since inception, according to LCH Investments. Readers should not interpret their trades to mean that Nvidia is a bad investment, but rather that diversification has merit. Here’s why the iShares Bitcoin Trust is a compelling long-term investment for risk-tolerant investors.
Bitcoin Spot ETFs See Demand From Institutional Investors
At any given time, the price of Bitcoin is determined by supply and demand. However, its supply is limited to 21 million coins, so demand is ultimately the driver of price action. In other words, demand for Bitcoin would have to increase significantly for its price to reach $1 million, and even more significantly for it to reach $3.8 million.
Bernstein and Ark Invest believe demand will come from spot Bitcoin ETFs, a brand new asset class approved by the SEC earlier this year. Spot Bitcoin ETFs track the price of Bitcoin by holding the cryptocurrency as the underlying asset, and they eliminate traditional sources of friction that may have kept retail and institutional investors out of the market, as detailed below.
-
Spot Bitcoin ETFs allow investors to add exposure to Bitcoin through existing brokerage accounts. This eliminates the complexity of managing a separate portfolio with a cryptocurrency exchange. It also simplifies tax reporting, as most brokers are directly linked to tax preparation software.
-
Bitcoin Spot ETFs are often cheaper. The iShares Bitcoin Trust has an expense ratio of 0.25%, meaning investors will pay $25 per year for every $10,000 in the fund. But Coinbase charges 0.4% to 0.6% per trade for orders under $10,000, meaning investors are hit with higher fees twice: once when they buy, and again when they sell.
Bernstein and Ark Invest expect Bitcoin to follow different trajectories over the next decade, but they agree on one thing: demand from institutional investors will drive the expected gains.
We are still in the early stages of adoption, but institutional demand for spot Bitcoin ETFs is evident in recent Form 13F filings with the SEC. As mentioned, all three major hedge funds – Citadel Advisor, DE Shaw, and Millennium Management – have begun investing in the iShares Bitcoin Trust. Several major investment banks, including JP Morgan Hunting, Morgan StanleyAnd Wells Fargoalso bought Bitcoin ETFs for cash.
However, most institutional investors currently have very small positions, meaning their holdings represent an insignificant portion of their portfolios. But analysts at Bernstein, Chhugani and Sapra believe that institutional investors are “evaluating ‘net long’ positions as they become comfortable with improving ETF liquidity.”
Ark Invest’s Cathie Wood estimates that institutional investors will end up investing just over 5% of their portfolios in spot Bitcoin ETFs. As a reminder, institutions had nearly $120 trillion in assets under management last year, so Ark’s forecast implies that these investors will allocate over $6 trillion to spot Bitcoin ETFs in the future. If that happens, Wood says the price of Bitcoin could reach $3.8 million.
History says Bitcoin will hit a new high between April 2025 and October 2025
Bernstein is also bullish on Bitcoin due to the halving event that took place in April 2024. “We believe that a new cycle starting with the halving is not a coincidence, but driven by unique supply and demand dynamics,” the analysts wrote in a recent note.
To elaborate, Bitcoin block subsidies (newly created bitcoins awarded to miners for solving cryptographic puzzles to verify transaction blocks) are reduced by 50% every time 210,000 blocks are added to the blockchain. These halving events occur roughly once every four years, with the most recent one occurring in April.
This is important because Bitcoin has already experienced three halving events and its price has always reached a new peak 12 to 18 months later, as shown in the chart below.
Halving Date
Maximum yield
Time to return to the top
November 2012
10,485%
371 days
July 2016
3 103%
525 days
May 2020
707%
546 days
Source: Fidelity Digital Assets.
As noted above, post-halving yields have decreased with each subsequent halving event, simply because each subsequent halving event has a smaller impact on the total supply. But history suggests that Bitcoin will peak between April 2025 and October 2025.
A warning for investors
Past performance is never a guarantee of future returns and price targets should never be taken for granted. Bitcoin is a relatively new asset class and its limited history means that it is virtually impossible to predict its performance.
Additionally, Bitcoin has dropped more than 50% on multiple occasions, and similar declines are plausible (if not likely) in the future. Investors who are comfortable with these risks should consider buying a position in the iShares Bitcoin Trust today. Adding exposure to the cryptocurrency is a great way to diversify a portfolio overloaded with AI stocks like Nvidia.
Should You Invest $1,000 in iShares Bitcoin Trust Right Now?
Before you buy shares of iShares Bitcoin Trust, consider the following:
THE Motley Fool, Securities Advisor The team of analysts has just identified what they believe to be the 10 best stocks Investors need to buy now…and iShares Bitcoin Trust isn’t one of them. These 10 stocks could deliver monstrous returns in the years to come.
Consider when Nvidia I made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $722,626!*
Securities Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building advice, regular analyst updates and two new stock picks each month. Securities Advisor The service has more than quadrupled the performance of the S&P 500 since 2002*.
See all 10 actions »
*Stock Advisor returns as of July 15, 2024
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, JPMorgan Chase, and Nvidia. The Motley Fool has a disclosure policy.
Billionaires are selling Nvidia shares and buying an index fund that could soar as much as 5,655%, according to some Wall Street analysts.
