Recently filed 13Fs revealed that two prominent hedge fund managers sold Nvidia shares in the second quarter and reallocated capital into iShares Bitcoin Trust (NASDAQ:IBIT), an exchange-traded fund (ETF) that tracks bitcoin (CRYPTO:BTC).
David Shaw of DE Shaw sold 12.1 million shares of Nvidia stock, reducing his holdings by 52%, while buying 2.4 million shares of iShares Bitcoin Trust, increasing his holdings by 1,658%.
Steven Cohen of Point72 Asset Management sold 409,042 shares of Nvidia, reducing his holdings by 16%, and bought 1.6 million shares of iShares Bitcoin Trust, diversifying into cryptocurrencies for the first time.
The Shaw-Cohen deal is notable because both fund managers have track records that go beyond their billionaire status: DE Shaw and Point72 rank second and 13th, respectively, among the 20 best-performing hedge funds of all time, according to LCH Investments.
That said, investors shouldn’t interpret their trade as a sign that Nvidia is a bad investment, but rather the importance of portfolio diversification. Artificial intelligence (AI) stocks like Nvidia can generate significant wealth over time, but the same is true for cryptocurrencies like Bitcoin. Some Wall Street experts believe Bitcoin (and, as a result, the iShares Bitcoin Trust) could soar by 83,000%.
Wall Street experts predict huge profits for Bitcoin holders
Bitcoin has started the year with a bang. Bitcoin’s price has more than doubled in 2023, and the rally accelerated in early 2024 after the U.S. Securities and Exchange Commission (SEC) approved a Bitcoin ETF for spot trading on U.S. stock exchanges. Excitement surrounding the halving event in April also contributed to the upward momentum.
Bitcoin hit an all-time high above $73,000 in March but fell as investors became less risk averse. Economic uncertainty sparked a reversal in sentiment. Investors entered the year expecting the Federal Reserve to cut interest rates by June, but policymakers instead kept them on hold at their highest levels in two decades.
In early August, things only got worse: Weak employment reports raised questions about whether the Federal Reserve was moving too slowly and rekindled fears of a recession, which led to a sharp drop in stocks and the worst selling pressure in the crypto market since the collapse of FTX in 2022.
Bitcoin is currently trading at $59,000, down about 20% from its March high, but Wall Street experts remain very bullish on the cryptocurrency.
Bernstein analysts Gautam Chugani and Mahika Sapra expect that a spot Bitcoin ETF will unlock demand from retail and institutional investors, leading to Bitcoin trading at $200,000 by 2025, $500,000 by 2029, and $1 million by 2033. The high end of this forecast represents a 1,595% upside.
In 2023, ARK Invest released a valuation model that predicted Bitcoin would hit $1.5 million per coin by 2030. However, CEO Cathie Wood revised that figure to $3.8 million at a Bitcoin conference in March, citing the belief that institutional investors would allocate roughly 5% of their assets to Bitcoin in the future. This projection implies a 6,440% increase in value.
MicroStrategy Chairman Michael Saylor recently gave a keynote speech at the Bitcoin Conference where he laid out some very aggressive price targets: “We could see $3 million in a bearish scenario and $49 million in a bullish scenario,” he said. The low end of Saylor’s range implies a 5,085% upside, while the high end implies an 83,000% upside.
The story continues
A Spot Bitcoin ETF could unlock Bitcoin demand from retail and institutional investors
Bitcoin price is determined by supply and demand, however, with Bitcoin’s supply limited to 21 million coins, demand is the most important variable.
This is where spot Bitcoin ETFs could make a big difference: These new funds remove a traditional source of friction by allowing investors to add Bitcoin exposure to their existing brokerage accounts.
In other words, investors no longer need to have separate accounts at cryptocurrency exchanges and pay exorbitant fees for each trade. Some spot bitcoin ETFs boast relatively low expense ratios. For example, the iShares Bitcoin Trust charges a fee of 0.25% per year, meaning investors would pay $25 for every $10,000 invested in the fund.
Spot Bitcoin ETFs are drawing more retail and institutional investors into the market by reducing friction. For example, according to Bloomberg’s Eric Balchunas, iShares Bitcoin Trust accumulated more assets in its first 50 trading days than any ETF in history. According to The Wall Street Journal, the fund reached $10 billion in assets faster than any ETF on record.
That said, spot Bitcoin ETFs still have a ways to go before they reach 5% of institutional assets under management (AUM), which is what Cathie Wood hopes to achieve in the long term. Institutional assets under management totaled $120 trillion last year, and 5% of that is about $6 trillion. Spot Bitcoin ETFs currently have less than $60 billion in total assets.
History predicts Bitcoin will hit new highs between April 2025 and October 2025
Bitcoin miners earn block subsidies (newly minted bitcoins) by solving cryptographic puzzles required to verify transactions, but their payments are reduced by 50% every 210,000 blocks added to the blockchain. So-called halvings occur roughly once every four years, with the most recent one occurring in April.
This is important for two reasons. First, the halving event means that miners will issue less Bitcoin over the next four years, reducing one source of selling pressure simply because there are fewer Bitcoins available to sell. Second, Bitcoin has gone through three halving cycles so far and its price has always peaked 12-18 months later, as shown in the graph below.
Half-life date
Peak Return
Time to Peak Return
November 2012
10,485%
371 days
July 2016
3,103%
525 days
May 2020
707%
546 days
Source: Fidelity Digital Assets.
That means history predicts Bitcoin will hit new highs between April 2025 and October 2025.
Note to potential investors
Past performance is never a guarantee of future earnings, investors should not take the projections I’ve discussed for granted, and I believe the $49 million price target (which represents an 83,000% upside) is unreasonable.
Additionally, because Bitcoin is a relatively new asset class, there is limited data to predict how it will perform in different economic environments. Bitcoin has also been very volatile in its short history. The cryptocurrency has fallen by more than 50% on multiple occasions and is likely to experience similar declines in the future.
Investors with a high risk tolerance and who can accept that possibility should consider investing a small portion of their portfolio in Bitcoin, either by purchasing the cryptocurrency directly or through a spot Bitcoin ETF, although I believe investors should limit it to no more than 5% of their investment assets.
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Trevor Jennewine invests in Nvidia. The Motley Fool invests in and recommends Bitcoin and Nvidia. The Motley Fool has a disclosure policy.
Billionaires are selling Nvidia shares and buying index funds that could rise as much as 83,000%, according to Wall Street experts. This was originally published by The Motley Fool.
