Billionaire money managers are some of the brightest minds on Wall Street. However, the moves of hedge funds and family offices do not always reflect the opinions of analysts, whose job is to advise investors. But if the two agree, it could mean an investment is about to soar higher.
That’s why it’s particularly remarkable that several billionaires are focusing on the iShares Bitcoin Trust(NASDAQ: IBIT). The leading Bitcoin exchange-traded fund (ETF) has attracted the attention of several notable asset managers in the first six months of 2024, including Israel Englander, David Shaw and Steven Cohen.
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Israel Englander added 10.9 million shares of the ETF to Millenium Management’s portfolio.
David Shaw’s DE Shaw & Company purchased 2.6 million shares of the ETF.
Steven Cohen bought 1.7 million shares for Point72 Asset Management.
At the same time, several Wall Street analysts and insiders have set a huge long-term price target Bitcoin(CRYPTO: BTC)the underlying value behind the iShares Bitcoin Trust. Cathie Wood of Ark Invest says Bitcoin could reach $1 million or more by 2030. Bernstein analysts suggest it could take until 2033 to reach that milestone. Tech CEOs Michael Saylor and Jack Dorsey also expect Bitcoin to reach a value of $1 million, and they have invested heavily in the cryptocurrency through their companies. At the time of writing, that price represents an increase of 1,207% over the next six years.
Here is the bullish case for Bitcoin and the iShares Bitcoin Trust.
The Securities and Exchange Commission (SEC) approved eleven spot Bitcoin ETFs in early 2024, and they could unlock a lot of value for Bitcoin. The ETFs make investing in Bitcoin much easier for institutional investors like the billionaires mentioned above.
To date, more than $25 billion has flowed into these ETFs since their launch in January, at the time of writing. But the majority of those funds came from private investors, not from the big banks and hedge funds. That said, investment advisors and hedge funds investing in Bitcoin ETFs like the iShares Bitcoin Trust are two of the fastest growing interested parties.
Many institutional investors may be waiting for more clarity on cryptocurrency regulations. Bitcoin prices soared following news that Donald Trump had won the US presidential election, as his administration is expected to provide a favorable regulatory environment for Bitcoin. Still, the real value will come from any regulation, whether tight or loose, that gives institutional investors clear boundaries and guidelines for how to invest in Bitcoin.
The hedge funds mentioned above have only 0.1% to 0.2% of their stock portfolios invested in the iShares Bitcoin Trust. They also hold other Bitcoin-related investments, including other spot Bitcoin ETFs. Still, they represent some of the biggest early investors.
Cathie Wood, the Bernstein analysts and others expect that institutional investors will eventually hold at least 1% of their portfolio in Bitcoin or Bitcoin ETFs. That adoption by big money will drive Bitcoin’s price higher due to limited supply capacity.
Another factor that could drive up prices is the rising cost of mining Bitcoin. The cost of mining Bitcoin is largely a factor of how many miners participate in the activity. As demand drives the price higher, it increases competition to mine the next block, making it more expensive to do so. The market creates an equilibrium over time, with some miners dropping out because the cost of mining is not worth the payout, but eventually prices will rise above the marginal cost of production for Bitcoin.
When Bitcoin undergoes a halving, it reduces the reward miners receive for each block they attach to the Bitcoin blockchain. This means that supply grows more slowly, but demand does not change. At the same time, miners are showing less selling pressure in the market. These two factors tend to lead to higher prices over time, as Bitcoin undergoes a halving event once every four years. Bitcoin’s next halving will take place in early 2028, and another will take place in 2032.
Overall, Bernstein analysts expect Bitcoin to trade at around 1.5 times its marginal cost of production. That brings the base case for next year to $200,000. But as production costs rise, analysts see the price rising to $500,000 in 2029 and $1 million in 2033.
The above analyst calls for a $1 million Bitcoin in just a few years are based on fundamental analysis. This is the real deal. But it’s important to note that they make a lot of educated guesses, and those guesses could turn out to be completely wrong.
Bitcoin is an extremely volatile asset with limited intrinsic value, especially when you consider the utility of newer cryptocurrencies that improve on fundamental blockchain technology. As such, it could easily become virtually worthless over time if the above statement is incorrect.
That said, the analysts appear to be directionally accurate. The future looks bright for Bitcoin, regardless of whether or not it will reach $1 million by 2030. It may be worth putting a small portion of your portfolio into the asset class, either directly or through a spot Bitcoin ETF like the iShares Bitcoin Trust.
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Adam Levy has positions in Bitcoin. The Motley Fool holds and recommends positions in Bitcoin. The Motley Fool has a disclosure policy.
Billionaires are piling into an index fund that could rise as much as 1,207% by 2030, according to Wall Street Experts originally published by The Motley Fool
