Billionaire money managers are some of the shrewdest minds on Wall Street. However, the decisions of hedge funds and family offices do not always match the opinions of analysts, whose job is to advise investors. But when the two match up, it can mean an investment is about to skyrocket.
This is why it is particularly remarkable that several billionaires are piling up in the world. iShares Bitcoin Trust(NASDAQ:IBIT). The leading spot Bitcoin exchange-traded fund (ETF) has attracted the attention of several notable asset managers, including Israel Englander, David Shaw and Steven Cohen in the first six months of 2024.
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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 purchased 1.7 million shares for Point72 Asset Management.
At the same time, several analysts and Wall Street insiders have set a massive long-term price target for Bitcoin(CRYPTO:BTC)the underlying asset behind the iShares Bitcoin Trust. Arch Invest Cathie Bois claims Bitcoin could reach $1 million or more by 2030. Bernstein analysts suggest it may take until 2033 to reach that milestone. Tech CEOs Michael Saylor and Jack Dorsey also expect Bitcoin to hit $1 million, and they have invested heavily in the cryptocurrency through their companies. This price represents a 1,207% increase over the next six years, as of this writing.
Here are the optimistic arguments in favor of Bitcoin and the iShares Bitcoin Trust.
Image source: Getty Images.
The Securities and Exchange Commission (SECOND) approved 11 spot Bitcoin ETFs in early 2024, and they could unlock a ton of value for Bitcoin. ETFs make investing in Bitcoin much easier for institutional investors like the billionaires mentioned above.
So far, more than $25 billion has been invested in these ETFs since their launch in January, as of this writing. But the majority of those funds came from retail investors, not big banks and hedge funds. That said, investment advisors and hedge funds that invest in Bitcoin ETFs like iShares Bitcoin Trust are two of the fastest growing interested parties.
Many institutional investors may be waiting for more regulatory clarity on cryptocurrency. Bitcoin prices surged on news of Donald Trump’s victory in the US presidential election, with his administration expected to provide a favorable regulatory environment for Bitcoin. Nonetheless, the real value will come from any regulations, whether strict or loose, that give institutional investors clear limits and guidelines on how to invest in Bitcoin.
The hedge funds listed above only invest 0.1% to 0.2% of their stock portfolios in the iShares Bitcoin Trust. They also hold other Bitcoin-related investments, including other spot Bitcoin ETFs. They nevertheless represent some of the most important early investors.
Cathie Wood, Bernstein analysts and others expect institutional investors to eventually hold at least 1% of their portfolio in Bitcoin or Bitcoin ETFs. This adoption by the wealthy will drive up the price of Bitcoin due to its limited supply capacity.
Another factor that could push prices higher is the increasing cost of mining Bitcoin. The cost of mining Bitcoin largely depends on the number of miners participating in the activity. As demand drives up prices, competition for mining the next block increases, making mining more expensive. The market creates an equilibrium over time, with some miners giving up because the cost of mining is not worth it, but ultimately prices will eventually exceed the marginal cost of producing Bitcoin.
When Bitcoin is halved, it reduces the reward miners receive for each block they confirm on the Bitcoin blockchain. This means that supply increases more slowly, but demand does not change. At the same time, miners exert less selling pressure on the market. These two factors generally cause prices to rise over time, as Bitcoin halves approximately every four years. The next Bitcoin 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 the marginal cost of production. That puts his base case at $200,000 for next year. But as production costs rise, analysts predict the price will rise to $500,000 by 2029 and $1 million by 2033.
The analysts above are calling for a million-dollar Bitcoin in just a few years, based on fundamental analysis. This is the real deal. But it’s important to note that they’re making 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 considering the utility of new cryptocurrencies that enhance the fundamental technology of blockchain. As such, it could easily become almost worthless over time if the above thesis does not hold true.
That said, analysts appear to be accurate in their direction. The future looks bright for Bitcoin, whether or not it hits $1 million by 2030. It may be worth putting a small portion of your portfolio in the asset class, either directly or through a Spot Bitcoin ETF like iShares Bitcoin Trust.
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