Recently filed Forms 13F show that two high-profile hedge fund managers sold shares of Nvidia during the second quarter while reallocating capital to the iShares Bitcoin Trust (IBIT +2.24%), an exchange-traded fund (ETF) that tracks Bitcoin (BTC +0.43%).
- David Shaw at D.E. Shaw sold 12.1 million shares of Nvidia, trimming his position by 52%. Meanwhile, he bought 2.4 million shares of the iShares Bitcoin Trust, increasing his position by 1,658%.
- Steven Cohen at Point72 Asset Management sold 409,042 shares of Nvidia, trimming his position by 16%. He bought 1.6 million shares of the iShares Bitcoin Trust, diversifying into cryptocurrency for the first time.
The trades made by Shaw and Cohen are noteworthy because both fund managers have credentials beyond their status as billionaires. D.E. Shaw and Point72 rank second and 13th, respectively, among the 20 best-performing hedge funds in history, according to LCH Investments.
That said, investors shouldn't interpret their trades to mean Nvidia is a bad investment, but rather, that portfolio diversification is important. Artificial intelligence (AI) stocks like Nvidia could create substantial wealth over time, but the same is true of cryptocurrencies like Bitcoin. Some Wall Street experts think Bitcoin (and consequently, the iShares Bitcoin Trust) could surge 83,000%.
NASDAQ: IBIT
Key Data Points
Select Wall Street experts are forecasting colossal gains for Bitcoin holders
Bitcoin entered the year at full steam. Its price had more than doubled in 2023, and the gains accelerated in early 2024 when the U.S. Securities and Exchange Commission (SEC) approved the trading of spot Bitcoin ETFs on U.S. stock exchanges. Excitement surrounding the April halving event also contributed to the upward momentum.
Bitcoin hit a record high above $73,000 in March before stumbling when investors lost their appetites for risk. Economic uncertainty caused the sentiment reversal. Investors entered the year thinking the Federal Reserve would cut its benchmark interest rate by June, but policymakers have kept rates at their highest level in two decades.
The situation changed from bad to worse in early August. Recession fears resurfaced when a weak jobs report raised questions about whether the Federal Reserve was moving too slowly. That concern caused the stock market to plunge, and the cryptocurrency market suffered its worst sell-off since FTX collapsed in 2022.
Bitcoin currently trades at $59,000, about 20% below its March peak. But these Wall Street experts remain exceedingly bullish on the cryptocurrency.
- Bernstein analysts Gautam Chhugani and Mahika Sapra think Bitcoin will trade at $200,000 by 2025, $500,000 by 2029, and $1 million by 2033 as spot Bitcoin ETFs unlock demand from retail and institutional investors. The high end of that forecast implies 1,595% upside.
- Ark Invest published a valuation model in 2023 that priced Bitcoin at $1.5 million per coin by 2030. But CEO Cathie Wood revised that figure to $3.8 million at a Bitcoin conference in March, based on the idea that institutional investors will allocate about 5% of their assets to Bitcoin in the future. That forecast implies 6,440% upside.
- MicroStrategy executive chairman Michael Saylor recently delivered a keynote speech at a Bitcoin conference that included an ultra-bullish price target. "It could be a $3 million bear case, it could be a $49 million bull case," he said. The low end of his predicted range implies 5,085% upside, and the high end implies 83,000% upside.
Spot Bitcoin ETFs could unlock demand for Bitcoin from retail and institutional investors
Bitcoin's price is a function of supply and demand. However, Bitcoin supply is limited to 21 million coins, meaning demand is the most consequential variable.
That's where spot Bitcoin ETFs could make a big difference. Those new funds eliminate traditional sources of friction by letting investors add Bitcoin exposure to existing brokerage accounts.
In other words, investors no longer need a separate account with a cryptocurrency exchange or have to pay exorbitant fees for each transaction. Several spot Bitcoin ETFs bear relatively low expense ratios. For instance, the iShares Bitcoin Trust charges an annual fee of 0.25%, so investors will pay $25 for every $10,000 invested in the fund.
By reducing friction, spot Bitcoin ETFs are bringing more retail and institutional investors to the market. For instance, the iShares Bitcoin Trust accumulated more assets during its first 50 trading days than any ETF in history, according to Eric Balchunas at Bloomberg. The fund also reached $10 billion in assets faster than any ETF on record, according to The Wall Street Journal.
That said, spot Bitcoin ETFs have a ways to go before reaching 5% of institutional assets under management (AUM), which is what Cathie Wood expects over time. Institutional AUM totaled $120 trillion last year, and 5% of that figure is roughly $6 trillion. Collectively, spot Bitcoin ETFs have less than $60 billion in assets right now.
History says Bitcoin will hit a new high between April 2025 and October 2025
Bitcoin miners earn block subsidies (newly minted Bitcoin) for solving the cryptographic puzzles required to verify transactions. But the payout is reduced by 50% every time 210,000 blocks are added to the blockchain. Those so-called halving events happen about once every four years, and the most recent one took place in April.
That is significant for two reasons. First, the halving event means miners will be minting less Bitcoin over the next four years, which will reduce one source of selling pressure simply because they have less Bitcoin to sell. Second, Bitcoin has gone through three halving cycles previously, and its price has always peaked 12 to 18 months later, as shown in the chart below.
|
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.
In short, history says Bitcoin will reach a new record high sometime between April 2025 and October 2025.
A word of caution for prospective investors
Past performance is never a guarantee of future returns, and investors shouldn't take the forecasts I've discussed for granted. I find the price target of $49 million (which implies an upside of 83,000%) absurd.
Additionally, Bitcoin is a relatively new asset class, so there's limited data available to make predictions about how it may perform in different economic climates. Bitcoin has also been very volatile throughout its short history. The cryptocurrency has declined more than 50% on several occasions and similar drawdowns are likely in the future.
Risk-tolerant investors comfortable with that possibility should consider investing a small percentage of their portfolios in Bitcoin, either by purchasing the cryptocurrency directly or through a spot Bitcoin ETF. I think investors should limit their exposure to 5% of invested assets.
