In the first half of 2024, the billionaires listed below started positions in BlackRock's exchange-traded fund (ETF) that tracks the spot price of Bitcoin(CRYPTO: BTC). The fund is called the iShares Bitcoin Trust(NASDAQ: IBIT). Their positions remain small, but their ownership is still noteworthy because they manage the three best-performing hedge funds in history as measured by net gains, according to LCH Investments.
- Ken Griffin of Citadel Advisors bought a net total of 63,186 shares of the iShares Bitcoin Trust. The position represents less than one-tenth of a percent of his $494 billion portfolio.
- David Shaw of D.E. Shaw & Company bought a net total of 2.6 million shares of the iShares Bitcoin Trust. The position represents one-tenth of a percent of his $107 billion portfolio.
- Israel Englander of Millennium Management bought a net total of 10.8 million shares of the iShares Bitcoin Trust. The position represents two-tenths of a percent of his $216 billion portfolio.
Bitcoin more than doubled in value over the last year, and some Wall Street experts are predicting monster gains in the coming decades. Indeed, one forecast leaves room for Bitcoin's price to appreciate 73,000% by 2045, which implies equivalent gains in the iShares Bitcoin Trust. Here's what investors should know.
Wall Street bulls think Bitcoin could soar as much as 73,000%
Bernstein analyst Gautam Chhugani estimates Bitcoin could reach $500,000 by 2029 and $1 million by 2033 as the cryptocurrency is made increasingly mainstream by spot Bitcoin ETFs. The latter figure in that forecast implies about 1,390% upside from its current price of $67,000.
Cathie Wood at Ark Invest estimates Bitcoin could hit $3.8 million by 2030, provided that institutional investors "allocate a little more than 5% of their portfolios to Bitcoin," which she sees as a likely outcome. That forecast implies 5,570% upside from its current price.
MicroStrategy Executive Chairman Michael Saylor estimates Bitcoin will reach $13 million by 2045, though he sees a bear-case scenario where it stops at $3 million and a bull-case scenario where it surges to $49 million. Saylor's base case implies 19,300% upside from the current price, but the bull case implies 73,000% upside.
Those Wall Street bulls have at least one thing in common. They believe spot Bitcoin ETFs will unlock demand among institutional investors. Importantly, institutions have about $120 trillion in assets under management. Even a small percentage of those assets allocated to Bitcoin could cause its price to increase substantially.
The investment thesis for Bitcoin depends on adoption by institutions
The investment thesis for Bitcoin is simple: With supply limited to 21 million coins, its price is primarily determined by demand. Spot Bitcoin ETFs could boost demand among retail and institutional investors by eliminating traditional sources of friction associated with cryptocurrency exchanges.
To elaborate, spot Bitcoin ETFs let investors add Bitcoin to existing brokerage accounts, such that they no longer need distinct cryptocurrency exchange accounts. Also, spot Bitcoin ETFs tend to be cheaper than transacting on cryptocurrency exchanges. For instance, the iShares Bitcoin Trust has an expense ratio of 0.25%, but Coinbase Global charges 0.6% per transaction for orders under $10,000.
In January, Yassine Elmandjra at Ark Invest enumerated the benefits of spot Bitcoin ETFs following their approval in January 2024 by the SEC.
First, a spot ETF provides a direct way for institutional and retail investors to gain exposure to Bitcoin without dealing with the complexities of self-custody or other onboarding requirements. Second, spot ETFs legitimize Bitcoin as an institutional asset, which should catalyze Bitcoin's acceptance and integration into traditional financial systems. Finally, spot ETFs should increase Bitcoin's liquidity and trading volumes significantly.
Wood believes institutional investors will allocate about $6 trillion to Bitcoin by 2030, while Chhugani at Bernstein estimates a slightly more conservative $3 trillion by 2033. For context, spot Bitcoin ETFs have accumulated $63 billion in assets, which is about 1% of Wood's prediction and 2% of Chhugani's prediction.
However, spot Bitcoin ETFs have undoubtedly peaked institutional interest. 13F forms indicate that about 600 institutional investors had stakes in the iShares Bitcoin Trust as of the second quarter, up from about 450 in the first quarter. That figure should trend higher as time passes and professional money managers become more comfortable with Bitcoin.
Bitcoin is a very risky asset that could theoretically go to zero
Time for a reality check. Investors should bear in mind that forecasts are unreliable. There is no guarantee that Bitcoin comes anywhere close to the targets proposed by Chhugani, Wood, or Saylor. In fact, there is no guarantee that Bitcoin will be worth anything at all a decade from now.
The cryptocurrency has declined more than 50% on several occasions and similar drawdowns are probable in the future. Indeed, the cryptocurrency could theoretically drop to zero. So, investors should be comfortable with the idea of losing everything before they invest anything in Bitcoin, whether directly or indirectly through an exchange-traded fund like the iShares Bitcoin Trust.
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Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.
