During the fourth quarter, several hedge fund billionaires added to their positions in the iShares Bitcoin Trust (IBIT 2.53%), an exchange-traded fund (ETF) managed by BlackRock that tracks the spot price of Bitcoin (BTC 2.06%). Details are provided below:
- Israel Englander's Millennium Management bought 6.3 million shares of the spot Bitcoin ETF, increasing its position by 27%. The BlackRock fund is now the third largest holding in the portfolio excluding options.
- Ken Griffin's Citadel Advisors bought 1 million shares of the spot Bitcoin ETF, increasing its stake 5,196%. However, the BlackRock fund still represents a relatively small portion of the overall portfolio.
- David Shaw's D.E. Shaw bought 7.4 million shares of the spot Bitcoin ETF, increasing its position by 345%. The BlackRock fund now ranks among the top 25 holdings in the portfolio excluding options.
- Paul Tudor Jones' Tudor Investment bought 3.6 million shares of the spot Bitcoin ETF, increasing its stake 82%. The BlackRock fund now ranks as the largest holding in the portfolio excluding options.
Bitcoin ownership for years was primarily limited to retail investors, but Forms 13F filed in February indicate that successful institutional investors have taken an interest. Citadel, D.E. Shaw, and Millennium are the three most profitable hedge funds in history, according to LCH Investments.
Importantly, certain Wall Street experts expect Bitcoin (and therefore the iShares Bitcoin Trust) to soar in the coming years. Here's what investors should know.
NASDAQ: IBIT
Key Data Points
Some Wall Street experts anticipate huge gains for Bitcoin holders
Bitcoin in January reached a high of nearly $106,200, but its price has since tumbled about 18% to $87,500 as of March 26. The reason for that decline is likely a combination of profit taking and economic uncertainty. The cryptocurrency market soared after Donald Trump won the presidential election in November, but tariffs have pushed investors away from risky assets.
Nevertheless, the Wall Street experts listed below think Bitcoin is headed much higher in the long run:
- Bernstein analyst Gautam Chhugani thinks Bitcoin could reach $1 million by 2033. That implies about 1,040% upside from its current price.
- Bitwise CIO Matt Hougan thinks Bitcoin will reach $1 million by 2029. That also implies about 1,040% upside from its current price but in much less time.
- Ark Invest CEO Cathie Wood thinks Bitcoin could hit $3.8 million by 2030. That implies about 4,240% upside from its current price.
- Strategy Executive Chairman Michael Saylor estimates Bitcoin's price will fall between $3 trillion and $49 trillion by 2045. This implies upside ranging from 3,325% to 55,900% from its current price.
Importantly, the target prices listed above imply equivalent upside in spot Bitcoin ETFs such as the iShares Bitcoin Trust. Investors should never lean too heavily on forecasts, especially those that imply enormous gains, but there is good reason to think Bitcoin will be more valuable in the future.
Image source: Getty Images.
The investment thesis for Bitcoin is stronger than ever
The investment thesis for Bitcoin centers entirely on demand. Its supply is limited to 21 million coins, which leaves demand as the only variable of consequence. And several forces promise to drive Bitcoin demand higher in the coming years.
Spot Bitcoin ETFs: The Securities and Exchange Commission (SEC) last year approved spot Bitcoin ETFs, investment products that provide exposure to the cryptocurrency without the hassle and high fees of cryptocurrency exchanges. The response has been overwhelming. The iShares Bitcoin Trust attracted over $37 billion in net inflows during its first year on the market, making it the most successful ETF launch in history, according to The Wall Street Journal.
Institutional demand: Bitwise CIO Matt Hougan last year wrote, "Bitcoin ETFs are being adopted by institutions at the fastest rate of any ETF in history." That is important because institutional investors like banks, hedge funds, and pensions collectively have more than $120 trillion in assets under management. A small fraction of that sum allocated to Bitcoin could drive its price much higher.
Regulatory changes: President Donald Trump earlier this year created a strategic Bitcoin reserve. The market was disappointed because the memo did not leave room for the government to purchase Bitcoin but instead said the reserve would be capitalized with Bitcoin seized during criminal proceedings. However, that could change in the future. In the meantime, the pro-cryptocurrency stance of the current administration further legitimizes Bitcoin.
Here's the bottom line: Spot Bitcoin ETFs are unlocking demand among retail investors and institutional investors. And support shown for the cryptocurrency industry by the current presidential administration could encourage more investors to enter the market. Also, the U.S. government may eventually buy Bitcoin for its strategic reserve. Those forces should contribute to demand, driving its price higher.
Mind the risks associated with Bitcoin
Personally, I think Bitcoin could reach $1 million at some point in the future, but investors should be aware of the associated risks before putting money into the cryptocurrency.
Namely, Bitcoin has been volatile throughout its relatively short history. Its price declined more than 50% from a record high three times in the last five years and often took at least six months to recover. Also, the dearth of historical data makes it difficult to predict how various economic events (e.g., recession) may impact its price.
Investors comfortable with those risks should consider adding Bitcoin exposure to their portfolios. And buying a small position in the iShares Bitcoin Trust is a cheap and simple way to make that happen.
