Artificial intelligence has been one of the hottest investing topics on Wall Street this year. 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 huge opportunity emerging Bitcoin (CRYPTO: BTC) due to the recent approval of spot Bitcoin ETFs.
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Bernstein’s Gautam Chugani and Mahika Sapra believe that Bitcoin could reach $200,000 by 2025, $500,000 by 2029, and $1 million by 2030. These projections ultimately represent a 1,415% rise from its current price of $66,000.
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Last year, Cathie Wood estimated that Bitcoin could reach $1.5 million by 2030, but she raised that figure to $3.8 million after the approval of Bitcoin exchange-traded funds. Her latest forecast suggests a 5,655% rise from the current price.
Several successful hedge fund managers sold Nvidia shares during the first quarter, while simultaneously buying Nvidia shares. iShares Bitcoin Trust (NASDAQ: IBIT), one of the recently approved spot Bitcoin ETFs.
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Ken Griffin of Citadel Advisors sold 2.4 million shares of Nvidia stock in the first quarter, reducing his holding by 68%. At the same time, he took a small position in the iShares Bitcoin Trust.
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David Shaw of DE Shaw sold 1.4 million shares of Nvidia stock in the first quarter, reducing his holding by 38%. At the same time, he took a small position in the iShares Bitcoin Trust.
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Millennium Management’s Israel Englander sold 720,004 shares of Nvidia in the first quarter, reducing his holding by 35%. At the same time, he took a fairly large position in the iShares Bitcoin Trust, making it his 12th-largest holding excluding options.
The three billionaires mentioned above are noteworthy because they run the three largest hedge funds measured by net gains since inception, according to LCH Investments. Readers shouldn’t interpret their trades to mean that Nvidia is a bad investment, but rather that diversification has its advantages. That’s why the iShares Bitcoin Trust is a worthwhile long-term holding for risk-tolerant investors.
Spot Bitcoin ETFs Spark Demand From Institutional Investors
At any given moment, the price of Bitcoin is determined by supply and demand. However, the supply is limited to 21 million coins, so demand is ultimately the driving force behind price movement. In other words, demand for Bitcoin would need to increase significantly for its price to reach $1 million, and even more so for its price to reach $3.8 million.
Bernstein and Ark Invest believe demand will come from Bitcoin ETFsa completely new asset class approved by second Earlier this year, spot bitcoin ETFs track the price of bitcoin by holding the cryptocurrency as an underlying asset, and they eliminate traditional sources of friction that may have kept retail and institutional investors out of the market, as detailed below.
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Spot Bitcoin ETFs allow investors to add exposure to Bitcoin through their existing brokerage accounts. This eliminates the complexity of maintaining a separate portfolio with cryptocurrency exchanges. It also simplifies tax reporting since most brokerage firms link directly to tax preparation software.
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Spot bitcoin 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 It charges 0.4% to 0.6% per transaction for orders under $10,000, which means investors are hit with higher fees twice — once when they buy, and again when they sell.
Bernstein and ArkInvest expect Bitcoin to follow different paths over the next decade, but they agree on one thing: demand from institutional investors will drive the expected gains.
We’re 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 we mentioned earlier, the top three hedge funds — Citadel Advisors, D.E. Shaw, and Millennium Management — have already started positions in the iShares Bitcoin Trust. Several major investment banks, including JPMorgan Chasing, Morgan StanleyAnd Wells Fargoand has also bought spot Bitcoin ETFs.
However, most institutional investors currently have very small positions, meaning their holdings represent an insignificant portion of their portfolios. But Bernstein analysts Chugani and Sapra believe that institutional investors are “in the process of evaluating net long positions as they feel comfortable with improved ETF liquidity.”
Similarly, Cathie Wood of Ark Invest believes that institutional investors will eventually put just over 5% of their portfolios into Bitcoin ETFs. For context, institutions had nearly $120 trillion in assets under management last year, so Ark’s projections suggest that these investors will allocate over $6 trillion to Bitcoin ETFs in the future. If that happens, Wood says Bitcoin could reach a price of $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 will take place in April 2024. “We believe that the new cycle starting with the halving is not a coincidence, but is driven by unique supply and demand dynamics,” the analysts wrote in a recent note.
To illustrate, Bitcoin block subsidies — newly minted bitcoins given to miners for solving cryptographic puzzles to verify blocks of transactions — are reduced by 50% every time 210,000 blocks are added to the blockchain. These halving events occur roughly every four years, with the most recent occurring in April.
This is important because Bitcoin has gone through three halving events before, and its price always hits a new peak after 12 to 18 months, as shown in the chart below.
Half history
peak return
It’s time for the peak to return.
November 2012
10,485%
371 days
July 2016
3,103%
525 days
May 2020
707%
546 days
Source: Fidelity Digital Assets.
As shown above, post-halving returns 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 sometime between April 2025 and October 2025.
A word of caution to 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 track record means that predicting its performance is essentially impossible.
Additionally, Bitcoin has fallen by more than 50% on several occasions and similar pullbacks are possible (if not likely) in the future. Investors who are comfortable with this risk should consider buying a position in the iShares Bitcoin Trust today. Adding exposure to cryptocurrencies is a great way to diversify a portfolio that is heavy on AI stocks like Nvidia.
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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 Ginuwine He has positions in Nvidia. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, JPMorgan Chase, and Nvidia. The Motley Fool has Disclosure Policy.
Billionaires are selling Nvidia shares and buying an index fund that could rise as much as 5,655%, according to some Wall Street analysts. Originally published by The Motley Fool
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