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Billionaires Are Buying This Cryptocurrency ETF That Could Rise 1,050% to 5,400%, Some Wall Street Analysts Say
Bitcoin has more than doubled in value over the past year, but these wealthy hedge fund managers are still bullish on the cryptocurrency.
Bitcoin (Bitcoin 2.90%) has rallied 154% over the past year. Several factors made this recovery possible, including a rotation into risky assets as recession fears abated. However, the approval of Bitcoin spot exchange traded funds (ETFs) has certainly contributed to these gains, which could have a more significant impact in the future.
To learn more, in January the Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs. Some analysts called that decision a watershed moment for the cryptocurrency because those ETFs could unlock demand from institutional investors, a group with about $100 trillion in assets under management.
Lo and behold, several hedge fund managers have purchased positions in the recently approved package iShares Bitcoin Trust (IBIT 1.85%) during the first quarter, as detailed below.
- Israel Englander of Millennium Management bought 20.9 million shares of iShares Bitcoin Trust, worth $844 million, on March 31. The ETF ranks 12th largest excluding options contracts.
- Steven Schonfeld of Schonfeld Strategic Advisors purchased 6.1 million shares of iShares Bitcoin Trust, valued at $752 million. The ETF is its second-largest holding excluding options contracts.
- Ken Griffin of Citadel Advisors bought 440,709 shares of iShares Bitcoin Trust, valued at $17.8 million.
- Paul Singer of Elliot Investment Management purchased 296,010 shares of iShares Bitcoin Trust, valued at $12 million.
Some analysts have made bold predictions in the wake of the SEC’s approval of spot Bitcoin ETFs. For example, Anthony Scaramucci of SkyBridge Capital believes Bitcoin could eclipse gold’s market capitalization. This values the cryptocurrency at around $800,000 per coin, implying an upside of around 1,050% from its current price of $69,000.
Likewise, Cathie Wood of Ark Invest believes 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 increase demand for the cryptocurrency
The price of Bitcoin is ultimately determined by supply and demand. That said, since supply is limited to 21 million coins, demand is the most important variable. In other words, the price of Bitcoin will increase as demand increases and decrease as demand decreases.
The case of the bull for Spot Bitcoin ETF It’s simple: they offer direct exposure to Bitcoin but without the friction associated with cryptocurrency exchanges. This value proposition could bring more retail and institutional investors to the market, unlocking demand that drives its price higher.
To elaborate, spot Bitcoin ETFs tend to be less expensive than cryptocurrency exchanges. The iShares Bitcoin Trust has a expense ratio by 0.25%, meaning annual fees would amount to $25 for every $10,000 invested in the fund. In comparison, CoinBase charges between 0.4% and 0.6% per transaction for orders under $10,000.
Additionally, Bitcoin spot ETFs allow investors to add Bitcoin exposure to existing brokerage accounts. But buying Bitcoin outright involves creating, funding, and maintaining a separate account with a cryptocurrency exchange. It might seem like a small source of friction, but it probably kept some investors on the sidelines
Indeed, this theory is supported by the extraordinary success that some spot Bitcoin ETFs have enjoyed since their launch. For example, iShares Bitcoin Trust e Wise Origin Bitcoin Fund according to Bloomberg’s Eric Balchunas, they accumulated more assets during their first 50 days of trading than any other ETF in history.
The iShares Bitcoin Trust is worth buying, but with reasonable expectations
Every spot Bitcoin ETF should do the same thing: buy Bitcoin, split it into shares and sell them on the stock market. Not surprisingly, investors have gravitated toward ETFs that offer lower fees, especially those issued by well-known asset managers.
As mentioned, Black rockFidelity’s iShares Bitcoin Trust and Wise Origin Bitcoin Fund have been very successful. 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 is it guaranteed to reach Cathie Wood’s $3.8 million price target. Both outcomes are plausible – I would never be so bold as to say anything was impossible regarding cryptocurrency – but it is also possible that Bitcoin will go to zero. Speculating on the future price is relatively fruitless.
Investors should instead focus on the facts. According to Ark Invest, Bitcoin has outperformed virtually every other asset class over the past five years, including stocks, bonds, commodities, gold and real estate. This information makes a compelling case to own Bitcoin (or a spot Bitcoin ETF), but only for investors who are comfortable with high risk and extreme volatility.