Artificial intelligence (AI) is one of the hottest themes on Wall Street, and Nvidia has been one of the hottest stocks. Its share price surged 175% over the last year because the company dominates the market for AI chips. But AI is not the only trend that could turn small sums into fortunes.
Institutional investors are also betting on cryptocurrency. The hedge fund managers listed below sold shares of Nvidia in the first half of 2024, and they started positions in the iShares Bitcoin Trust (NASDAQ: IBIT), an exchange-traded fund that tracks Bitcoin (CRYPTO: BTC).
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Steven Cohen at Point72 Asset Management sold 3.4 million shares of nvidia in the first half of 2024, cutting his stake by 63%. He also bought 1.6 million shares of the iShares Bitcoin Trust.
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Israel Englander at Millennium Management sold 7.8 million shares of Nvidia in the first half of 2024, reducing his stake by 38%. He also bought 10.8 million shares of the iShares Bitcoin Trust.
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Ken Griffin at Citadel Advisors sold 33.9 million shares of Nvidia in the first half of 2024, slashing his stake by 93%. He also bought 63,186 shares of the iShares Bitcoin Trust.
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David Shaw at D.E. Shaw & Co. sold 26.3 million shares of Nvidia in the first half of 2024, cutting his stake by 70%. He also bought 2.6 million shares of the iShares Bitcoin Trust.
Those trades are especially noteworthy because Point72, Millennium, Citadel, and D.E. Shaw rank among the 15 best-performing hedge funds in history as measured by net gains since inception. However, all four money managers still have exposure to Nvidia, so it would be wrong to assume they have completely lost conviction in the AI chipmaker.
Instead, the lesson here is that portfolio diversification is important, and AI is not the only way to make money in the stock market. Indeed, Wall Street experts think Bitcoin could surge as much as 77,675% in the coming decades, which implies identical gains in the iShares Bitcoin Trust.
Wall Street pundits are predicting monster gains for Bitcoin
Bitcoin’s price soared 133% during the past year due to enthusiasm about spot Bitcoin ETFs and the halving event that took place in April. Bitcoin currently trades at $63,000, but the Wall Street pundits below expect that figure to increase substantially.
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Tom Lee of Fundstrat Global Advisors thinks Bitcoin could reach $500,000 by 2029. That forecast implies 690% upside.
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Gautam Chhugani and Mahika Sapra at Bernstein believe Bitcoin could be worth $1 million by 2033. That forecast implies 1,485% upside.
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Cathie Wood at Ark Invest believes Bitcoin could reach $3.8 million by 2030. That forecast implies 5,930% upside.
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Michael Saylor at MicroStrategy thinks Bitcoin’s price will land somewhere between $3 million and $49 million by 2045. That forecast implies upside ranging from 4,660% to 77,675%.
All four Bitcoin bulls based their predictions on two things. First, the recent approval of spot Bitcoin ETFs will increase demand, particularly among institutional investors. Second, the periodic halving events that limit Bitcoin’s supply will gradually reduce selling pressure from miners.
Spot Bitcoin ETFs are driving institutional demand for Bitcoin
Like any asset, Bitcoin’s price depends on supply and demand. But the cryptocurrency is somewhat atypical because its supply is limited to 21 million coins, so demand is the most consequential variable. That’s why spot Bitcoin ETFs could have a big impact. They eliminate traditional sources of friction, like maintaining separate accounts for stocks and cryptocurrencies, and paying high fees for each transaction.
To elaborate, spot Bitcoin ETFs let investors add cryptocurrency exposure to existing brokerage accounts, and many of the funds have relatively low expense ratios. The iShares Bitcoin Trust charges 0.25% per year, which means investors will pay $25 on every $10,000 invested. But Coinbase charges transaction fees ranging from 0.4% to 0.6% for orders under $10,000. Those fees are not only higher, but also investors get hit twice: once when they buy, and again when they sell.
The SEC approved spot Bitcoin ETFs in January, but they have already made good on their promise to unlock demand. The iShares Bitcoin Trust reached $10 billion in assets faster than any other ETF in history, according to The Wall Street Journal. Additionally, I’ve already mentioned four successful hedge fund managers that own shares of the iShares Bitcoin Trust, but 592 institutional investors reported positions in the second quarter, up from 436 in the first quarter.
If that trend continues, Bitcoin could be worth a lot more in the future. I say that because institutional investors have $120 trillion in assets under management, and allocating a little more than 5% of that total to Bitcoin (or spot Bitcoin ETFs) would propel its price to $3.8 million, according to Cathie Wood.
History says Bitcoin will hit a new high in 2025
Bitcoin’s supply limit is enforced by periodic halving events. Miners are rewarded with block subsidies (newly minted Bitcoin) when they successfully verify a transaction block, but the payout is reduced by 50% every time 210,000 blocks are added to the blockchain. That happens about once every four years.
Importantly, halving events reduce selling pressure from the mining community, simply because miners are minting less Bitcoin to sell. For instance, Michael Saylor estimates the April 2024 halving event will cut selling pressure from $12 billion per year to $6 billion per year. Accordingly, Bitcoin has consistently peaked 12 to 18 months following each halving event in the past, as shown in the chart below.
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Halving Date |
Peak Return |
Time to Peak Return |
|---|---|---|
|
November 2012 |
10,485% |
371 days |
|
July 2016 |
3,103% |
525 days |
|
May 2020 |
707% |
546 days |
Source: Fidelity Digital Assets.
Bitcoin hit a record high of $73,000 earlier this year, prior to the April halving event. So, history says its price will exceed that level sometime between April 2025 and October 2025.
Investors should consider the downside before buying Bitcoin
Before putting money in Bitcoin, investors should consider two things. First, not even the smartest Wall Street analyst knows the future, so forecasts are simply educated guesses. There is no guarantee Bitcoin comes anywhere close to the price targets I’ve discussed. Second, Bitcoin has fallen more than 50% several times in its relatively short history, and similar drawdowns are probable in the future.
Risk-tolerant investors comfortable with that should consider putting a small portion of their portfolios into Bitcoin, either directly or through the iShares Bitcoin Trust. How small is a personal preference, but I would personally cap my investment around 5% of my portfolio. Remember, it is possible that Bitcoin could go to zero in the future. Don’t invest a single penny you aren’t prepared to lose.
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Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Bitcoin and Nvidia. The Motley Fool has a disclosure policy.
Billionaires Are Selling Nvidia Stock and Buying an Index Fund That Could Soar Up to 77,675%, According to Wall Street Experts was originally published by The Motley Fool
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