Palantir Technologies has led the S&P 500 higher in 2024. Shares have advanced 283% year to date due to the company's encouraging revenue growth and its strong positioning in the artificial intelligence (AI) economy.
But AI is not the only investment theme to catch Wall Street's attention. The hedge fund managers below sold shares of Palantir in the third quarter, and purchased shares of the iShares Bitcoin Trust(NASDAQ: IBIT), an index fund that tracks the price of Bitcoin(CRYPTO: BTC).
- Israel Englander of Millennium Management sold 4.4 million shares of Palantir, reducing his position by 90%. He also purchased 12.6 million shares of the iShares Bitcoin Trust, increasing his stake 116%.
- 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%.
- 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%.
Trades made by Israel Englander are especially noteworthy 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 position in his portfolio.
The lesson here is not to avoid artificial intelligence stocks, but rather to embrace portfolio diversification. Bitcoin has more than doubled in value this year, and several Wall Street experts think the cryptocurrency will be worth far more a decade or two from today.
Wall Street bulls think Bitcoin could soar as much as 54,300%
Bitcoin's price has increased 35% in the last month alone due to excitement surrounding the US. Presidential election. Not only will Donald Trump return to the White House for a second term, but Republicans came away controlling both halves of Congress.
Some industry observers think the Republican sweep will lead to pro-cryptocurrency policy changes, including the possible creation of a strategic Bitcoin reserve. But Bitcoin also has other catalysts on the horizon. The Wall Street experts below believe spot Bitcoin ETFs will unlock substantial demand, driving its price skyward.
- Bernstein analyst Gautam Chhugani believes Bitcoin will reach $1 million by 2033. That forecast implies about 1,000% upside from its current price of $90,000 over the next nine years.
- Ark Invest CEO Cathie Wood estimates Bitcoin could hit $3.8 million by 2030. That forecast implies about 4,100% upside from its current price over the next six years.
- MicroStrategy Executive Chairman Michael Saylor estimates Bitcoin's price will land between $3 million and $49 million by 2045. The forecast implies upside ranging from 3,200% to 54,300% over the next two decades.
Investors should never take price targets too seriously, especially when they seem too good to be true (like the ones above). But the iShares Bitcoin Trust warrants further consideration given the upside baked into the price targets above.
Image source: Getty Images.
The investment thesis for Bitcoin, and why spot Bitcoin ETFs are a game changer
The investment thesis for Bitcoin is simple: Like any asset, its 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 cryptocurreny will become more valuable as demand rises and less valuable as demand falls. And spot Bitcoin ETFs could be a game changer where demand is concerned.
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 a certain degree. That is important because a recent survey shows 63% of U.S. adults lack confidence in cryptocurrency's safety, according to Pew Research. Spot Bitcoin ETFs provide a more familiar onramp for those potential retail investors.
Similarly, 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 in Bitcoin, its price would soar. For instance, Cathie Wood estimates Bitcoin would be worth $3.8 million if institutions allocated a little over 5% of their assets, an outcome she sees a likely in the years ahead.
Importantly, while we are still in the early days of adoption, spot Bitcoin ETFs have already spurred demand. After winning SEC approval in January, spot Bitcoin ETFs became the most successful ETF launch in history, according to Gautam Chhugani. And the iShares Bitcoin Trust has been the most impressive of the group. It reached $10 billion in assets faster than any ETF on record, according to The Wall Street Journal.
A word of caution for prospective Bitcoin investors
Spot Bitcoin ETFs could help drive Bitcoin's price much higher in the future, and they offer a valuable source of diversification at a time when many stocks are rather expensive -- Palantir is a good example. But investors should bear in mind that cryptocurrency is a relatively nascent asset class that is prone to extreme volatility.
Indeed, Bitcoin has declined more than 30% from a record high on six separate occasions in the last decade, and it often took more than a year to recover. Similar drawdowns are probable in the future. Investors should be comfortable with that before putting money into Bitcoin (or spot Bitcoin ETFs).
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Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Bitcoin and Palantir Technologies. The Motley Fool has a disclosure policy.
