Artificial intelligence stocks have stolen the spotlight in recent months, but Bitcoin could be one of the next things on Wall Street.
Artificial Intelligence (AI) has been one of the hottest investment topics on Wall Street this year, Nvidia (NVDA Image 4.76%) has become the quintessential AI stock because of its leadership in machine learning processors. But some Wall Street analysts see a big opportunity ahead Bitcoin (BTC 0.38%) due to the recent approval of spot Bitcoin ETFs.
- Gautam Chhugani and Mahika Sapra of Bernstein believe that Bitcoin can reach $ 200,000 in 2025, $ 500,000 in 2029, and $ 1 million in 2030. That prediction finally suggests 1,415% from the current price of $66,000.
- Last year, Cathie Wood estimated that Bitcoin could reach $1.5 million in 2030, but she raised that figure to $3.8 million after the approval of the Bitcoin ETFs space. His latest quote suggests a 5,655% upside to the current price.
Several successful hedge fund managers sold shares of Nvidia in the first quarter, while at the same time buying shares of iShares Bitcoin Trust (GO 1.38%)one of the most recently adopted Bitcoin ETFs.
- Ken Griffin at Citadel Advisors sold 2.4 million shares of Nvidia in the first quarter, reducing his stake by 68%. Meanwhile, he started a small position in the iShares Bitcoin Trust.
- David Shaw at DE Shaw sold 1.4 million shares of Nvidia in the first quarter, reducing his stake by 38%. Meanwhile, he started a small position in the iShares Bitcoin Trust.
- Millennium Management’s Israel Englander sold 720,004 shares of Nvidia in the first quarter, reducing his stake by 35%. Meanwhile, he started a large position in the iShares Bitcoin Trust, making it his twelfth largest position outside of options contracts.
The three billionaires mentioned above are notable because they run the top three hedge funds as measured by the most profits since inception, according to LCH Investments. Readers should not interpret their work to mean that Nvidia is a bad investment, but instead there are benefits. This is why the iShares Bitcoin Trust is a good long-term investment for risk-tolerant investors.
Spot Bitcoin ETFs are opening up demand from institutional investors
At any given time, the price of Bitcoin is determined by supply and demand. However, its supply is limited to 21 million coins, so demand is what drives the price action. In other words, the demand for Bitcoin will need to increase significantly for its price to reach $1 million, and even more for its price to reach $3.8 million.
Bernstein and Ark Invest believe demand will come from Bitcoin ETFs, a new asset class approved by the SEC earlier this year. Spot Bitcoin ETFs track the price of Bitcoin by holding the cryptocurrency as an underlying asset, eliminating traditional sources of friction that can keep retail and institutional investors out of stock. they are out of the market, as explained below.
- Spot Bitcoin ETFs allow investors to increase Bitcoin exposure through existing trading accounts. That eliminates the complexity of keeping a separate portfolio from cryptocurrency exchanges. It also simplifies tax reporting because most businesses integrate with tax preparation software.
- Spot Bitcoin ETFs are usually cheap. The iShares Bitcoin Trust has an expense ratio of 0.25%, meaning investors will pay $25 a year for every $10,000 in the fund. But Coinbase fees of 0.4% to 0.6% for transactions for orders less than $ 10,000, which means that investors receive high fees twice – once they buy, and when they sell.
Bernstein and Ark Invest expect Bitcoin to follow different paths over the next decade, but agree on one thing: Demand from institutional investors will drive the predicted gains.
We are still in the early stages of adoption, but institutional demand for Bitcoin ETFs is evident in recent Forms 13F filed with the SEC. As mentioned, three top hedge funds — Citadel Advisor, DE Shaw, and Millennium Management — have initiated positions in the iShares Bitcoin Trust. Several major investment banks, incl JPMorgan Chase, Morgan Stanleyand Wells Fargothey also bought Bitcoin ETFs.
However, many institutional investors currently have very small positions, which means that their stocks represent unnecessary parts of their portfolios. But analysts at Bernstein, Chhugani and Sapra believe that institutional investors are “on the verge of a reality check” as they become more comfortable with improving ETF value.”
Similarly, Cathie Wood at Ark Invest believes that institutional investors will end up placing more than 5% of their portfolios in Bitcoin ETFs. For context, institutions had about $120 trillion in assets under management last year, so Ark’s forecast suggests those investors will distribute cash. more than $6 trillion in Bitcoin ETFs in the future. If that happens, Wood says the price of Bitcoin could reach $3.8 million.
History says that Bitcoin will reach a new high between April 2025 and October 2025
Bernstein is also bullish on Bitcoin due to the halving event that took place in April 2024. “We believe that the new cycle that begins with the halving is not a coincidence, but is driven by a unique force a supply demand,” analysts wrote in a recent note.
To clarify, Bitcoin block grants — newly minted Bitcoin awarded to miners for solving cryptographic puzzles to verify transaction blocks — are reduced by 50% each time a block is created. 210,000 are added to the blockchain. Those semi-events happen once every four years, and the most recent one happened in April.
That is important because Bitcoin has gone through three halving events before, and its price has been reaching a new peak 12 to 18 months later, as shown in the chart below.
|
Date of Placement |
Peak Return |
Peak Return Time |
|---|---|---|
|
November 2012 |
10,485% |
371 days |
|
July 2016 |
3,103% |
525 days |
|
May 2020 |
707% |
546 days |
Source: Fidelity Digital Assets.
As shown above, post-halving returns are reduced with each subsequent halving event, simply because each subsequent halving event has an impact smaller than the total supply. But history suggests that Bitcoin will peak sometime between April 2025 and October 2025.
A note to investors
Past performance is never a guarantee of future returns, and price expectations should not be taken lightly. Bitcoin is a relatively new asset class, and its poor track record means that predicting its performance is impossible.
In addition, Bitcoin has declined by more than 50% on several occasions and similar declines are reasonable (if not possible) in the future. Investors comfortable with those risks should consider buying a position in the iShares Bitcoin Trust today. Adding exposure to cryptocurrency is a great way to diversify a portfolio full of AI stocks like Nvidia.
JPMorgan Chase is a marketing partner of The Ascent, a Motley Fool company. Wells Fargo is a marketing partner of The Ascent, a Motley Fool company. Trevor Jennewine has a position at Nvidia. The Motley Fool ranks and recommends Bitcoin, Coinbase Global, JPMorgan Chase, and Nvidia. The Motley Fool has a publicity strategy.
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