ETFs
Billionaires Are Buying This Cryptocurrency ETF That Could Climb 1,050% to 5,400%, According to Some Wall Street Analysts
Bitcoin (CRYPTO:BTC) is up 154% over the past year. Several factors made this resurgence possible, including a return to risk assets as recession fears waned. However, the approval of spot Bitcoin exchange-traded funds (ETFs) has certainly contributed to these gains, and they may have a more significant impact in the future.
For further details, the Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs in January. Some analysts have called the move a watershed moment for cryptocurrencies, as these ETFs could unlock demand from institutional investors, a group with around $100 trillion in assets under management.
Lo and behold, several hedge fund managers have purchased positions in the recently approved market. iShares Bitcoin Trust (NASDAQ: IBIT) during the first quarter, as detailed below.
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Israel Englander of Millennium Management purchased 20.9 million shares of iShares Bitcoin Trust, valued at $844 million on March 31. The ETF ranks 12th, excluding options contracts.
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Steven Schonfeld of Schonfeld Strategic Advisors purchased 6.1 million shares of iShares Bitcoin Trust, valued at $752 million. The ETF ranks as the second largest holding outside of options contracts.
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Ken Griffin of Citadel Advisors purchased 440,709 shares of iShares Bitcoin Trust, valued at $17.8 million.
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Paul Singer of Elliot Investment Management purchased 296,010 shares of iShares Bitcoin Trust, valued at $12 million.
Some analysts have made bold predictions following the SEC’s approval of spot Bitcoin ETFs. For example, Anthony Scaramucci of SkyBridge Capital believes that Bitcoin could eclipse the market capitalization of gold. This values the cryptocurrency at around $800,000 per coin, implying an upside of around 1,050% from its current price of $69,000.
In the same way, Cathie Bois of Ark Invest estimates that spot Bitcoin ETFs will eventually capture around 5% of institutional assets under management. This prediction values the cryptocurrency at around $3.8 million per coin, implying an upside of around 5,400% from its current price.
Here’s what investors should know.
Spot Bitcoin ETFs Could Drive Demand for the Cryptocurrency
The price of Bitcoin is ultimately determined by supply and demand. That said, with supply limited to 21 million coins, demand is the most important variable. In other words, the price of Bitcoin will increase as demand increases, and its price will decrease as demand decreases.
The case of the bull for spot Bitcoin ETFs is simple: they offer direct exposure to Bitcoin but without the friction associated with cryptocurrency exchanges. This value proposition could attract more retail and institutional investors to the market, unleashing demand that drives up its price.
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To be more specific, spot Bitcoin ETFs tend to be cheaper than cryptocurrency exchanges. The iShares Bitcoin Trust carries an expense ratio of 0.25%, meaning the annual fee would be $25 for every $10,000 invested in the fund. By comparing, Coinbase charges between 0.4% and 0.6% per transaction for orders under $10,000.
Additionally, spot Bitcoin ETFs allow investors to add Bitcoin exposure to existing brokerage accounts. But buying Bitcoin involves creating, funding, and maintaining a separate account with a cryptocurrency exchange. This may seem like a small source of friction, but it probably kept some investors away.
Indeed, this theory is corroborated by the extraordinary success that certain spot Bitcoin ETFs have experienced since their launch. For example, the iShares Bitcoin Trust and the Sage Original Bitcoin Fund has accumulated more assets in its first 50 trading days than any other ETF in history, according to Bloomberg’s Eric Balchunas.
The iShares Bitcoin Trust is worth buying but with reasonable expectations
Every spot Bitcoin ETF should do the same thing: buy Bitcoin, divide it into shares, and sell those shares on an exchange. It’s no surprise that investors have gravitated toward ETFs offering lower fees, particularly those issued by reputable asset managers.
As mentioned, black rockBoth the iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund have seen great success. This is because both funds have a relatively low expense ratio of 0.25%, but also because BlackRock and Fidelity are two of the largest asset managers in the world. Personally, I think investors interested in owning a spot Bitcoin ETF should keep things simple and choose between these two funds.
As a caveat, there is no guarantee that Bitcoin will ever reach Anthony Scaramucci’s $800,000 price target, nor Cathie Wood’s $3.8 million price target. Both outcomes are plausible – I would never say anything is impossible when it comes to cryptocurrency – but it is also possible that Bitcoin could reach zero. Speculating on future price is relatively useless.
Investors should instead focus on the facts. Bitcoin has outperformed virtually every other asset class over the past five years, including stocks, bonds, commodities, gold and real estate, according to Ark Invest. This information makes a compelling argument for owning Bitcoin (or a spot Bitcoin ETF), but only for investors comfortable with high risk and extreme volatility.
Should you invest $1,000 in iShares Bitcoin Trust right now?
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Trevor Jennevine has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.
Billionaires Are Buying This Cryptocurrency ETF That Could Climb 1,050% to 5,400%, According to Some Wall Street Analysts was originally published by The Motley Fool