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Recently submitted Forms 13F show that two leading hedge fund managers sold shares Nvidia during the second quarter, while capital was reallocated to the iShares Bitcoin Trust (NASDAQ: IBIT)an exchange-traded fund (ETF) to follow Bitcoin (CRYPTO: BTC).
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David Shaw at DE Shaw sold 12.1 million Nvidia shares, reducing his position by 52%. Meanwhile, he bought 2.4 million shares of the iShares Bitcoin Trust, increasing his position by 1,658%.
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Steven Cohen of Point72 Asset Management sold 409,042 shares of Nvidia, reducing his position by 16%. He bought 1.6 million shares of the iShares Bitcoin Trust, diversifying into cryptocurrency for the first time.
Shaw and Cohen’s trades are notable because both fund managers have credentials beyond their billionaire status. According to LCH Investments, DE Shaw and Point72 rank second and thirteenth, respectively, among the twenty best-performing hedge funds in history.
That said, investors should not interpret their trades as a sign that Nvidia is a bad investment, but rather that portfolio diversification is important. Artificial intelligence (AI) stocks like Nvidia can create significant wealth over time, but the same goes for cryptocurrencies like Bitcoin. Some Wall Street experts believe that Bitcoin (and consequently the iShares Bitcoin Trust) could rise by 83,000%.
Selected Wall Street experts predict huge profits for Bitcoin holders
Bitcoin entered the year at full speed. Its price more than doubled by 2023, and gains accelerated in early 2024 when the U.S. Securities and Exchange Commission (SEC) approved trading of spot Bitcoin ETFs on US exchanges. The excitement surrounding the April halving also contributed to the upward momentum.
Bitcoin hit an all-time high above $73,000 in March before stumbling as investors lost their risk appetite. The economic uncertainty caused the change in sentiment. Investors entered the year thinking the Federal Reserve would cut rates in June, but policymakers have kept rates at their highest level in 20 years.
At the beginning of August the situation changed from bad to worse. Recession fears resurfaced as a weak jobs report raised questions about whether the Federal Reserve was acting too slowly. That concern caused the stock market to plummet, and the cryptocurrency market suffered its worst sell-off since the FTX collapsed in 2022.
Bitcoin is currently trading at $59,000, about 20% below its March peak. But these Wall Street experts remain extremely optimistic about the cryptocurrency.
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Bernstein analysts Gautam Chhugani and Mahika Sapra think Bitcoin will trade at $200,000 by 2025, $500,000 by 2029 and $1 million by 2033 as spot Bitcoin ETFs will unlock demand from retail and institutional investors. The top end of that forecast implies an upside potential of 1.595%.
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Ark Invest published a valuation model in 2023 that would price Bitcoin at $1.5 million per coin by 2030. But CEO Cathie Wood revised that figure to $3.8 million at a Bitcoin conference in March, based on the idea that institutional investors will allocate about 5% of their money to stocks. assets to Bitcoin in the future. That forecast implies an increase of 6,440%.
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MicroStrategy Executive Chairman Michael Saylor recently gave a keynote speech at a Bitcoin conference with an ultra-bullish price target. “It could be a $3 million bear case, it could be a $49 million bull case,” he said. The low end of its forecast range implies an increase of 5.085%, and the high end implies an increase of 83,000%.
Spot Bitcoin ETFs could unlock demand for Bitcoin from retail and institutional investors
The price of Bitcoin is a function of supply and demand. However, Bitcoin’s supply is limited to 21 million coins, meaning demand is the biggest variable.
That’s where spot Bitcoin ETFs can make a big difference. These new funds eliminate traditional sources of friction by letting investors add Bitcoin exposure to existing brokerage accounts.
In other words, investors no longer need a separate account at a cryptocurrency exchange or have to pay exorbitant fees for each transaction. Several spot Bitcoin ETFs have relatively low expense ratios. For example, the iShares Bitcoin Trust charges an annual fee of 0.25%, so investors pay $25 for every $10,000 invested in the fund.
By reducing friction, spot Bitcoin ETFs bring more retail and institutional investors into the market. For example, according to Bloomberg’s Eric Balchunas, the iShares Bitcoin Trust has collected more assets in its first 50 days of trading than any ETF in history. The fund also reached $10 billion in assets faster than any ETF The Wall Street Journal.
That said, spot Bitcoin ETFs still have a long way to go before reaching 5% of institutional assets under management (AUM), which Cathie Wood expects over time. Institutional assets under management totaled $120 trillion last year, and 5% of that figure equates to about $6 trillion. Collectively, spot Bitcoin ETFs currently have less than $60 billion in assets.
History says that Bitcoin will reach a new high between April 2025 and October 2025
Bitcoin miners earn block grants (newly minted Bitcoin) for solving the cryptographic puzzles needed to verify transactions. But the payout is reduced by 50% every time 210,000 blocks are added to the blockchain. These so-called halving events happen about once every four years, with the most recent one occurring in April.
This is important for two reasons. First, the halving means miners will mint less Bitcoin over the next four years, which will reduce a source of selling pressure simply because they have less Bitcoin to sell. Second, Bitcoin has previously gone through three halving cycles, and its price has always peaked 12 to 18 months later, as shown in the chart below.
|
Half-life date |
Peak efficiency |
Time to peak efficiency |
|---|---|---|
|
November 2012 |
10.485% |
371 days |
|
July 2016 |
3.103% |
525 days |
|
May 2020 |
707% |
546 days |
Source: Fidelity Digital Assets.
In short, history says that Bitcoin will reach a new all-time high sometime between April 2025 and October 2025.
A word of warning for potential investors
Past performance is never a guarantee of future returns, and investors should not take the forecasts I’ve discussed for granted. I find the $49 million price target (which implies an upside of 83,000%) absurd.
Furthermore, Bitcoin is a relatively new asset class, so there is limited data available to make predictions about how it will perform in different economic climates. Bitcoin has also been highly volatile throughout its short history. The cryptocurrency has fallen by more than 50% on several occasions and similar declines are likely in the future.
Risk-tolerant investors who are comfortable with this option should consider investing a small percentage of their portfolios in Bitcoin, either by purchasing the cryptocurrency directly or through a spot Bitcoin ETF. I think investors should limit their exposure to 5% of invested assets.
Consider the following before purchasing shares in iShares Bitcoin Trust:
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Trevor Jennevine has positions at Nvidia. The Motley Fool has positions in and recommends Bitcoin and Nvidia. The Motley Fool has one disclosure policy.
Billionaires are selling Nvidia stock and buying an index fund that could rise as much as 83,000%, according to Wall Street experts was originally published by The Motley Fool