Palantir Technologies has led S&P500 higher in 2024. Shares are up 283% year to date thanks to the company’s encouraging revenue growth and its strong positioning in the artificial intelligence (AI) economy.
But AI isn’t the only investment theme catching Wall Street’s attention. The hedge fund managers below sold shares of Palantir and bought shares of the iShares Bitcoin Trust (NASDAQ: IBIT)an index fund that tracks the price of Bitcoin (CRYPTO: BTC).
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Israel Englander of Millennium Management sold 4.4 million shares of Palantir, reducing his position by 90%. He also bought 12.6 million shares of the iShares Bitcoin Trust, increasing his stake by 116%.
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Steven Schonfeld of Schonfeld Strategic Advisors sold 60,384 shares of Palantir, reducing his position by 100%. He also added 1.2 million shares of the iShares Bitcoin Trust, increasing his stake by 30%.
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Jeff Yass of Susquehanna International sold 277,273 shares of Palantir, reducing his position by 28%. He also bought 1.8 million shares of the iShares Bitcoin Trust, increasing his stake by 563%.
Israel Englander’s trades are especially notable because he runs the second most profitable hedge fund in history, according to LCH Investment. And excluding options contracts, the iShares Bitcoin Trust is the eighth largest holding in his portfolio.
The lesson here is not to avoid artificial intelligence stocks, but to embrace portfolio diversification. Bitcoin has more than doubled in value this year, and several Wall Street experts believe the cryptocurrency will be worth much more in a decade or two.
The price of Bitcoin has risen 35% in the past month alone due to the excitement surrounding the US. Presidential election. Not only will Donald Trump return to the White House for a second term, but Republicans will also control both halves of Congress.
Some industry observers believe the Republican move will lead to changes in pro-cryptocurrency policy, including the possible creation of a strategic Bitcoin reserve. But Bitcoin also has other catalysts on the horizon. The Wall Street experts below believe that spot Bitcoin ETFs will unlock substantial demand, driving their price higher.
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Bernstein analyst Gautam Chhugani believes Bitcoin will reach $1 million by 2033. That forecast implies an increase of about 1,000% from the current price of $90,000 over the next nine years.
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Cathie Wood, CEO of Ark Invest, estimates that Bitcoin could reach $3.8 million by 2030. That forecast implies an increase of about 4,100% from the current price over the next six years.
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MicroStrategy Executive Chairman Michael Saylor estimates that Bitcoin’s price will rise between $3 million and $49 million by 2045. The forecast implies an increase from 3,200% to 54,300% over the next twenty years.
Investors should never take price targets too seriously, especially if they seem too good to be true (as above). But the iShares Bitcoin Trust deserves further consideration given the benefits baked into the price targets above.
The investment thesis for Bitcoin is simple: as with any asset, price is a function of supply and demand. But demand is the most important variable in this case, because Bitcoin’s supply is limited to 21 million coins. So the cryptocurrency will become more valuable as demand increases, and less valuable as demand decreases. And spot Bitcoin ETFs could be a game changer when it comes to demand.
Spot Bitcoin ETFs reduce friction by eliminating the need for cryptocurrency exchange accounts (and the high fees associated with them), while also legitimizing Bitcoin to some extent. That’s important because a recent survey found that 63% of American adults don’t trust the security of cryptocurrency, according to Pew Research. Spot Bitcoin ETFs offer a more familiar entry point for those potential retail investors.
Likewise, spot Bitcoin ETFs also reduce friction for institutional investors, a group with $120 trillion in assets under management. If even a small percentage of those assets were put into Bitcoin, its price would rise. For example, Cathie Wood estimates that Bitcoin would be worth $3.8 million if institutions allocated just over 5% of their assets, an outcome she believes is likely in the coming years.
Importantly, while we are still in the early days of adoption, spot Bitcoin ETFs have already driven demand. After receiving SEC approval in January, Spot Bitcoin ETFs became the most successful ETF launch in history, according to Gautam Chhugani. And the iShares Bitcoin Trust was the most impressive of the group. According to The Wall Street Journal, it reached $10 billion in assets faster than any ETF ever.
Spot Bitcoin ETFs can help push the price of Bitcoin much higher in the future, and they provide a valuable source of diversification at a time when many stocks are quite expensive – Palantir is a good example. But investors should remember that cryptocurrency is a relatively emerging asset class that is prone to extreme volatility.
Bitcoin has fallen more than 30% from record highs six times in the past decade, with recoveries often taking more than a year. Similar declines are likely in the future. Investors should feel comfortable with this before putting money into Bitcoin (or spotting Bitcoin ETFs).
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Trevor Jennewine holds positions at Palantir Technologies. The Motley Fool has positions in and recommends Bitcoin and Palantir Technologies. The Motley Fool has a disclosure policy.
Billionaires are selling Palantir stock and buying an index fund that some Wall Street experts say could rise as much as 54,300%. originally published by The Motley Fool
