Studying what the biggest and best investors in the world are doing with their and their clients' money can provide some interesting ideas for the average investor. Luckily for us, every investment fund with at least $150 million in publicly traded U.S. securities has to file a quarterly form 13F with the Securities and Exchange Commission (SEC) disclosing their portfolio holdings.
The most recent round of filings revealed several hedge funds and the largest university endowment in the world all piling into BlackRock's iShares Bitcoin Trust (IBIT 0.19%). The exchange-traded fund (ETF) tracks the spot price of Bitcoin (BTC 0.68%), offering an easy way for investment funds to gain exposure to the crypto asset class.
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Here are just a handful of billionaires putting their funds to work in the BlackRock ETF:
- Alan Howard's Brevan Howard added 15.9 million shares, making it the hedge fund's largest position. That position is hedged with some put options.
- Israel Englander's Millennium Management teams collectively added 3.8 million shares. The ETF is now one of the aggregate fund's largest holdings.
- Tom Steyer's old hedge fund (of which he's still a shareholder) Farallon Capital added 1.2 million shares, making it a top-20 position.
- Harvard Management, which is in charge of Harvard University's endowment, established a new position in the ETF, buying 1.9 million shares. That makes it one of its top-five public security holdings.
Many analysts are bullish on Bitcoin, and growing investment from institutional investors like those above are a big reason. Here's why the BlackRock ETF could soar more than 10-fold during the coming years.
The long-term outlook for Bitcoin
Many long-term outlooks see Bitcoin climbing from about $114,000 per coin today to more than $1 million.
- Ark Invest, headed by Cathie Wood, expects it to reach $1.2 million by 2030.
- Bitwise put a $1.3 million price target on the cryptocurrency by 2035.
- Fundstrat's Tom Lee projected Bitcoin could reach $1 million without specifying a date in a recent interview.
- Strategy's Michael Saylor thinks Bitcoin will reach a $21 million by 2046.
There are two key factors driving those estimates: institutional adoption and the growth of Bitcoin as an inflation-protected investment.
CRYPTO: BTC
Key Data Points
Institutional investors hold more than $100 trillion in assets currently. That amount could nearly double during the next decade based on historical growth. With $200 trillion in assets under management, a 1% allocation toward Bitcoin could add $2 trillion to Bitcoin's market cap. That amount would be enough to nearly double Bitcoin's value from today. Ark's analysts have a base case of 2.5% allocation from institutions, which could more than triple its value or more when you consider not all Bitcoins are available for purchase.
The bigger growth driver, however, could come from Bitcoin overtaking gold as a store of value. Gold's current market cap exceeds $25 trillion. That's more than 10 times the total value of Bitcoin. Meanwhile, some analysts expect the recent strength of gold to continue as more investors seek an inflation hedge. That could result in the market for inflation-protected investments nearly doubling by the end of the decade. If Bitcoin takes one-quarter to one-half of that market, it could add $12 trillion to $25 trillion in market cap. That would increase Bitcoin's value by about 10-fold, on the high end.
There are other factors that could drive the value of Bitcoin higher as well, including purchases by corporate and sovereign nation-state treasuries and growing adoption as a safe asset in emerging markets. But the potential market sizes for those aren't nearly as big as institutional adoption and the store-of-value argument.
NASDAQ: IBIT
Key Data Points
Should you follow the billionaires?
Bitcoin is an extremely volatile asset, and it could easily see its value cut in half in short order. Even the biggest Bitcoin bulls won't deny that the short-term volatility of Bitcoin is a meaningful risk for investors. Still, a small allocation of your portfolio to Bitcoin could make sense for many investors as a diversification asset with significant long-term upside potential.
It's important to note, however, long-term price predictions are extremely unlikely to be totally accurate. But based on the analysis presented, these forecasts likely at least directionally accurate. It may be worth digging into the details of how these analysts came to their conclusions and price targets and developing your own model and assessing your own risk tolerance to determine whether Bitcoin deserves a spot in your portfolio.
