With cryptocurrency emerging as a stand-alone asset class, a growing number of billionaires are now hunting for potential investment opportunities. Some of them are buying cryptocurrencies for their enormous upside potential, while others are buying them for their ability to diversify a portfolio or hedge their overall market position.
Based on public statements and official 13F filings with the Securities and Exchange Commission (SEC), it's possible to put together a snapshot look at what top billionaires are buying. Unsurprisingly, Bitcoin (BTC +3.41%) and Ethereum (ETH +5.00%) are at the top of their shopping lists.
1. Bitcoin
Hedge fund billionaires Stanley Druckenmiller and Paul Tudor Jones are two high-profile names making the case for why Bitcoin should become a part of a diversified portfolio. As Druckenmiller has pointed out, Bitcoin has many of the same properties as gold, making it interesting as a potential long-term store of value. And Paul Tudor Jones has made the case that Bitcoin can be one way to hedge against geopolitical and macroeconomic risk.
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Billionaire hedge fund managers have emerged as some of the biggest buyers of the new spot Bitcoin exchange-traded funds (ETFs). Based on biweekly market data from CoinShares, it's possible to see at a glance which hedge funds are the biggest buyers.
Some of them -- such as Jane Street and Susquehanna International Group -- may be familiar names to regular readers of The Wall Street Journal. Others, such as Boston-based Bracebridge Capital -- which is run by the wealthiest female hedge fund manager in the U.S. -- may be less familiar. But what they all have in common is that they're loading up on Bitcoin.
And don't forget about billionaire Larry Fink of BlackRock Inc. (BLK +0.00%), which manages over $10 trillion in assets. Back in June 2023, BlackRock was the first to file a spot Bitcoin ETF application with the SEC. That ETF -- the iShares Bitcoin Trust (IBIT +1.85%) -- is now the most popular spot Bitcoin ETF. Fink is also a regular guest on CNBC, explaining why average investors should be investing in Bitcoin.
CRYPTO: BTC
Key Data Points
Much of the billionaire demand for Bitcoin is being driven by its upside potential. The growing consensus is that Bitcoin now has a path to $150,000 by the end of 2025. And from there, the sky's the limit. Cathie Wood of Ark Invest, for example, has suggested that Bitcoin could be worth as much as $3.8 million per coin by 2030.
2. Ethereum
While Bitcoin has garnered the most attention from billionaires, don't sleep on Ethereum. Arguably, Ethereum gives you much more diversification than Bitcoin since it's much more involved in every facet of the blockchain world. Ethereum is a smart contract blockchain network. It's a building block for everything from games and non-fungible tokens (NFTs) to metaverse worlds.
But what billionaires like best about Ethereum is its potential to disrupt the traditional world of Wall Street. That's due to the enormous strides being made in decentralized finance (DeFi), which can be thought of as the blockchain version of traditional finance. For example, traditional finance has centralized exchanges such as Coinbase Global (COIN +6.54%), while DeFi has decentralized exchanges such as Uniswap (UNI +0.83%).
Some of the best numbers about the disruptive potential of Ethereum come from Cathie Wood of Ark Invest. In this year's "Big Ideas 2024" report, she outlined exactly how much value is flowing from traditional finance to decentralized finance, especially smart contract blockchain networks such as Ethereum. Wood suggests that DeFi could grow at a 32% annualized rate over the next few years, making it a $5.2 trillion market opportunity by 2030.
If you're looking for a billionaire evangelist for Ethereum, look no further than Mark Cuban. Based on his experience as a tech entrepreneur and angel investor, he's well-positioned to discuss the benefits of Ethereum. Cuban has been beating the drum for Ethereum ever since 2021, when he praised its versatility and technological sophistication.
Do billionaires buy altcoins?
Based on the above, you might conclude that billionaires are only buying Bitcoin and Ethereum. That's not necessarily the case. If you parse the latest data from CoinShares, a handful of other cryptocurrencies appear to be attracting the attention of large institutional investors. These include Solana (SOL +2.18%), Litecoin (LTC +2.93%), XRP (XRP +2.38%), and Cardano (ADA +2.36%).
However, the amount of money that is flowing into these altcoins seems trivial in comparison. For example, over $8 billion has flowed into Bitcoin since the start of the year, and nearly $1 billion into Ethereum. In comparison, $34 million has flowed into Litecoin, $31 million into Solana, $22 million into XRP, and $12 million into Cardano.
This strategy of loading up on Bitcoin and Ethereum, while making relatively tiny crypto investments elsewhere, is probably one that makes sense for the average investor. You'll get the best of both worlds: enormous upside potential combined with some additional diversification for your portfolio.
