Recently filed Forms 13F show that two high-profile hedge fund managers owned shares of NVIDIA in the second quarter, while the capital in the iShares Bitcoin Trust (IBIT 3.57%)an exchange-traded fund (ETF) that Bitcoin (BTC 2.75%).

• David Shaw of DE Shaw sold 12.1 million shares of Nvidia, reducing his position by 52%. Meanwhile, he bought 2.4 million shares of the iShares Bitcoin Trust, increasing his position by 1,658%.
• Steven Cohen of Point72 Asset Management sold 409,042 shares of Nvidia, reducing his position by 16%, and bought 1.6 million shares of the iShares Bitcoin Trust, making his first cryptocurrency investment.

Shaw and Cohen’s transactions are notable because both fund managers have credentials that go beyond their status as billionaires. DE Shaw and Point72 rank second and 13th, respectively, among the 20 best-performing hedge funds of all time, according to LCH Investments.

However, investors should not interpret their transactions to mean that Nvidia is a bad investment, but rather that portfolio diversification is important. Artificial intelligence (AI) stocks like Nvidia could create significant wealth over time, but the same is true for cryptocurrencies like Bitcoin. Some Wall Street experts believe that Bitcoin (and consequently the iShares Bitcoin Trust) could rise by 83,000%.

Selected Wall Street experts predict huge profits for Bitcoin owners

Bitcoin started the new year with a bang. Its price had more than doubled in 2023, and gains accelerated in early 2024 when the U.S. Securities and Exchange Commission approved spot Bitcoin ETFs trading on U.S. exchanges. The excitement surrounding the halving event in April also contributed to the bullish momentum.

Bitcoin hit a record high of over $73,000 in March before faltering again as investors’ appetite for risk waned. Economic uncertainty was the reason for the change in sentiment. Investors began the year expecting the Federal Reserve to cut its benchmark interest rate by June, but policymakers kept rates at their highest in two decades.

In early August, the situation got even worse. Recession fears resurfaced when a weak jobs report raised questions about whether the Federal Reserve was moving too slowly. This concern sent the stock market plunging, and the cryptocurrency market experienced its worst sell-off since the FTX collapse in 2022.

Bitcoin is currently trading at $59,000, about 20 percent below its March high, but these Wall Street experts remain extremely optimistic about the cryptocurrency.

• Bernstein analysts Gautam Chhugani and Mahika Sapra expect Bitcoin to trade at $200,000 by 2025, $500,000 by 2029, and $1 million by 2033 as spot Bitcoin ETFs drive demand from retail and institutional investors. The upper end of this forecast represents an upside potential of 1,595%.
• Ark Invest published a valuation model in 2023 that estimated the Bitcoin price at $1.5 million per coin by 2030. However, CEO Cathie Wood revised this figure upwards to $3.8 million at a Bitcoin conference in March. This was based on the assumption that institutional investors will invest about 5% of their assets in Bitcoin in the future. This forecast implies an upside potential of 6,440%.
• MicroStrategy CEO Michael Saylor recently gave a keynote speech at a Bitcoin conference in which he outlined an extremely optimistic price target. “It could be a bear market at $3 million, but it could also be a bull market at $49 million,” he said. The lower end of his projected range represents an upside of 5,085 percent, while the upper end represents an upside of 83,000 percent.

Spot Bitcoin ETFs could boost demand for Bitcoin among retail and institutional investors

The price of Bitcoin is a function of supply and demand. However, the Bitcoin supply is capped at 21 million coins, meaning demand is the most important variable.

This is where spot Bitcoin ETFs could make a big difference. These new funds remove traditional friction points by allowing investors to add Bitcoin exposure to existing brokerage accounts.

In other words, investors no longer need a separate account with a cryptocurrency exchange, nor do they have to pay exorbitant fees for each transaction. Several spot bitcoin ETFs have relatively low expense ratios. The iShares Bitcoin Trust, for example, charges an annual fee of 0.25%, so investors pay $25 for every $10,000 invested in the fund.

By reducing friction, spot bitcoin ETFs are attracting more retail and institutional investors to the market. For example, according to Bloomberg’s Eric Balchunas, the iShares Bitcoin Trust has accumulated more assets in its first 50 days of trading than any other ETF in history. According to The Wall Street Journal.

However, spot bitcoin ETFs still have a long way to go before they reach 5% of institutional assets under management (AUM), which Cathie Wood expects to happen over time. Institutional AUM was $120 trillion last year, and 5% of that figure is about $6 trillion. Overall, spot bitcoin ETFs currently have less than $60 billion in assets.

History says Bitcoin will reach a new high between April 2025 and October 2025

Bitcoin miners receive block subsidies (newly minted bitcoins) for solving the cryptographic puzzles needed to verify transactions. However, the payout is reduced by 50% every time 210,000 blocks are added to the blockchain. These so-called halving events occur approximately every four years, the most recent of which occurred in April.

This is significant for two reasons. First, the halving event means that miners will be minting fewer bitcoins over the next four years, which will reduce one source of selling pressure simply because they will have fewer bitcoins to sell. Second, Bitcoin has previously gone through three halving cycles and its price has always peaked 12 to 18 months later, as shown in the chart below.

Source: Fidelity Digital Assets.

In short, history says that Bitcoin will reach a new all-time high sometime between April 2025 and October 2025.

A word of warning for potential investors

Past performance is no guarantee of future returns, and investors should not take for granted the projections I discuss. I think the price target of $49 million (which represents 83,000% upside) is absurd.

In addition, Bitcoin is a relatively new asset class, so there is limited data available to make predictions about how it might perform in different economic climates. Bitcoin has also been very volatile in its short history. The cryptocurrency has fallen by more than 50% several times, and similar declines are likely in the future.

Risk-tolerant investors who are comfortable with this opportunity should consider investing a small percentage of their portfolio in Bitcoin, either by purchasing the cryptocurrency directly or through a spot Bitcoin ETF. I think investors should limit their exposure to 5% of invested assets.