Just two years ago, it would have been close to impossible to find many billionaires seriously thinking about adding Bitcoin (BTC +1.58%) to their portfolios. But a lot has changed since then, including a crypto bull market and a wave of mainstream adoption powered by the new spot Bitcoin ETFs.
As a result, a growing number of billionaires around the globe are now looking for ways to get exposure to Bitcoin. Let's take a closer look at which billionaires are buying Bitcoin now, and what this new development might mean for the future price of Bitcoin.
Bitcoin supply squeeze
Any talk of billionaires buying Bitcoin has to start with Michael Saylor, executive chairman and co-founder of MicroStrategy (MSTR +2.05%). The billionaire started aggressively buying Bitcoin back in mid-2020, and has been continually ramping up his company's Bitcoin holdings since then.
Saylor's latest move was a new $600 million convertible note offering for MicroStrategy, with the funds being used to buy even more Bitcoin. This comes after a previous $800 million convertible note offering to buy Bitcoin. The company now holds 214,246 Bitcoins, which is slightly more than 1% of all Bitcoin in circulation.
Another billionaire at the forefront of the current Bitcoin rally is Larry Fink, the chief executive officer of BlackRock (BLK +0.00%). As the head of the largest asset manager in the world, Fink has become increasingly bullish in his support for Bitcoin.
In August 2022, BlackRock partnered with Coinbase Global on a new crypto trading platform, and last June, BlackRock was the first major investment firm to file a new spot Bitcoin exchange-traded fund (ETF) application. In less than three months since it has been approved, BlackRock's spot Bitcoin ETF has acquired 200,000 Bitcoins.
CRYPTO: BTC
Key Data Points
As might be expected, the tidal wave of Bitcoin buying by the new spot ETFs is leading to what some crypto traders have called a "Bitcoin supply squeeze." Simply stated, there's just not enough Bitcoin to go around. According to Saylor, there's now 10 times as much demand as supply for Bitcoin. As long as this remains the case, the price of Bitcoin seemingly has nowhere to go but up.
How much Bitcoin are billionaires really buying?
Billionaires, just like the smallest retail investors, are looking for ways to boost their allocations to Bitcoin. In just the past two months, those linked to Bitcoin include Mexican billionaire Ricardo Salinas, the Emir of Qatar (who could be buying for his country's sovereign wealth fund), and tech billionaire Jeff Bezos.
Image source: Getty Images.
While much of this could just be hype and speculation, the situation involving Bezos is particularly interesting. At the end of February, he sold $8.5 billion worth of Amazon shares. Almost immediately, the crypto community began speculating that he might be gearing up for a big Bitcoin buy, especially after a possible meeting with Michael Saylor.
If Bitcoin was formerly a neglected asset class for the world's ultra-wealthy, it now has their full attention. In fact, according to Ark Invest, the optimal allocation mix for Bitcoin soared to nearly 20% in 2023. If billionaires around the world decide to move 20% of their investable assets into Bitcoin, then watch out. This could unleash a flood of new money into Bitcoin, pushing up its price.
Be careful what you wish for
Billionaire hedge fund managers are also looking for ways to get exposure to Bitcoin. Unlike most retail investors, they are not just investing in Bitcoin for its upside potential. Primarily, they view it as a hedge against inflation and economic uncertainty. Billionaire Paul Tudor Jones, for example, said last year that Bitcoin could be a hedge against geopolitical risk.
But what happens if billionaire hedge fund managers decide to use Bitcoin to make macro bets on the global economy? Say, for example, hedge fund managers lose faith in the U.S. economy, due to unsustainable debt levels and rampant inflation. They might start buying Bitcoin and selling dollar-denominated assets.
In one scenario recently proposed by billionaire hedge fund manager Bill Ackman, the price of Bitcoin could "go to infinity" as the U.S. economy collapses. As Bitcoin soars in price, the cost of mining Bitcoin rises, which leads to higher energy prices, which leads to more inflation, which leads to more people betting against the U.S. dollar, which leads to more people buying Bitcoin, and the cycle repeats.
Yikes! That might be the ultimate example of "be careful what you wish for." Sure, your Bitcoin might be worth a lot, but everything else you own would likely be worth a lot less -- or even nothing.
Or, hedge fund managers might decide to bet against Bitcoin instead. It's still possible to find Bitcoin bears who think that we're in a huge speculative bubble for crypto right now and that the price of Bitcoin will eventually go to zero. So what if they start making highly leveraged bets against Bitcoin? Maybe it's not the U.S. dollar that collapses, but Bitcoin. That, too, would be a case of "be careful what you wish for."
Where does Bitcoin go from here?
I'm increasingly bullish about Bitcoin soaring during the next decade. If billionaires are buying Bitcoin, then that's an extremely bullish indicator. Given the limited supply of Bitcoin in the world, buying pressure from deep-pocketed billionaire investors should lead to huge price gains for everyone else.
