Professional fund managers and proprietary traders are some of the brightest minds on Wall Street. They study the markets closely and pounce on opportunities whenever they present themselves. They don't always stick to traditional stocks and bonds, and when a large group of them all look to capitalize on an asset it can signal a big opportunity for investors.
That's exactly what we saw in the fourth quarter.
Hundreds of institutional investors started new positions or added to their investments in the iShares Bitcoin Trust ETF (IBIT +1.37%) from BlackRock (BLK +0.41%) last quarter. A total of 1,149 13F filings with the Securities and Exchange Commission included the ETF in their disclosure, up from 673 in the third quarter, and the total number of shares owned by institutional investors more than doubled.
There were lots of good reasons more and more institutions saw an opportunity in Bitcoin (BTC +4.34%) last quarter and opted for the leading ETF for their investments. BlackRock Chief Executive Officer Larry Fink thinks the cryptocurrency and his ETF that tracks it could climb as much as 723% over the long run. That would mean a price of $700,000 for Bitcoin.
Here's why hedge funds and other institutional investors piled into the Bitcoin ETF in the fourth quarter and why Fink says it's not too late to join them.
Image source: Getty Images.
What drove investors to Bitcoin in the fourth quarter
The biggest factor that drove more institutional asset managers to invest in Bitcoin during the fourth quarter was the U.S. presidential election. Institutional investors were looking for more regulatory clarity for the cryptocurrency market. President Donald Trump is putting the pieces in place to do this.
President Donald Trump's pick for the SEC chairman, Paul Atkins, widely supports cryptocurrency. That's a strong contrast with his predecessor Gary Gensler, who remained skeptical of the asset class and was hesitant to approve securities like BlackRock's Bitcoin ETF.
Trump also wants to put in place additional regulations and protections for trading cryptocurrency. That could make it easier to use Bitcoin as well as provide protections for investors and lenders.
The president is also establishing a strategic crypto reserve of various cryptocurrencies, including Bitcoin. Although the U.S. won't buy any additional coins or tokens, it will hold seized assets in a reserve rather than sell them. For a cryptocurrency like Bitcoin, with a fixed supply, that can have a significant impact on bolstering its price.
Although most of those moves aren't in place yet, it's important to remember the market is based on expectations. It's widely expected that Trump will continue to make crypto-friendly moves, and hedge funds and other asset managers are buying up the iShares ETF ahead of those moves.
CRYPTO: BTC
Key Data Points
It's not too late to join them
As mentioned, 1,149 institutional investors filed disclosures showing they hold the BlackRock Bitcoin ETF. Their holdings combined amounted to $16.4 billion as of the end of 2024. They also had an additional $5.1 billion in options value.
There are other Bitcoin ETFs on the market, but BlackRock's is by far the most popular. Institutional investors could also hold Bitcoin directly, but holding an ETF is typically more convenient.
While that's a lot of investors with a lot of money, it's still just the tip of the iceberg when it comes to the amount of capital available from institutional investors. Global market assets under management were $175 trillion as of the end of June 2024, according to State Street Global. In other words, cryptocurrency barely registers as a blip in the realm of global assets under management.
That's why BlackRock's Fink suggests Bitcoin could climb much higher over the long run as we see more institutional investors adopt the cryptocurrency. At the World Economic Forum in Davos, Switzerland, in January, Fink said:
I was with a sovereign-wealth fund during this week, and there was a conversation, should we have a 2% allocation? Should we have a 5% allocation? If everybody adopted that conversation, it would be $500,000, $600,000, $700,000 for Bitcoin.
Fink isn't alone in his position. Ark Invest's Cathie Wood has also suggested institutional adoption could drive the price of Bitcoin significantly higher. Her price target is $3.8 million based on the assumption that institutional investors put 5% of their portfolios in Bitcoin.
It's worth pointing out gold accounts for roughly 3.6% of State Street's Global Market Portfolio. Many see gold as Bitcoin's most comparable asset class. Bitcoin may have slightly greater utility than gold, though, giving it an edge. As such, it might make sense for institutional adoption to come in closer to 2% over the long run. Still, that can provide a huge boost to Bitcoin's price from here -- perhaps to somewhere between $700,000 and $3.8 million. Compared to its current price of about $85,000 as of this writing, there's still a lot of upside.
