Billionaires are selling Nvidia shares and buying an index fund that some Wall Street analysts say could rise 5,655%

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Artificial intelligence (AI) has been one of the hottest investing themes on Wall Street this year, and Nvidia (NASDAQ: NVDA) has become the essential AI stock due to its leadership in machine learning processors. But some Wall Street analysts see a substantial opportunity emerging around Bitcoin (CRYPTO: BTC) due to the recent approval of spot Bitcoin ETFs.

  • Bernstein’s Gautam Chhugani and Mahika Sapra believe Bitcoin could reach $200,000 in 2025, $500,000 in 2029, and $1 million in 2030. That prediction ultimately implies a 1,415% increase from the current price of $66,000.

  • Last year, Cathie Wood estimated that Bitcoin could be worth $1.5 million by 2030, but she increased that figure to $3.8 million following the approval of spot Bitcoin ETFs. Her latest prediction implies a 5,655% increase from the current price.

Several successful hedge fund managers sold shares of Nvidia in the first quarter, while simultaneously buying shares of the iShares Bitcoin Confidence (NASDAQ: IBIT), one of the recently approved Bitcoin ETFs.

  • Citadel Advisors’ Ken Griffin sold 2.4 million shares of Nvidia stock in the first quarter, reducing his stake by 68%. Meanwhile, he started a small position in the iShares Bitcoin Trust.

  • David Shaw at DE Shaw sold 1.4 million shares of Nvidia stock in the first quarter, reducing his stake by 38%. Meanwhile, he started a small position in the iShares Bitcoin Trust.

  • Millennium Management’s Israel Englander sold 720,004 shares of Nvidia stock in the first quarter, reducing his stake by 35%. Meanwhile, he started a fairly large position in the iShares Bitcoin Trust, making it his twelfth-largest holding excluding options contracts.

The three billionaires mentioned above are notable for running the top three hedge funds by net profits since inception, according to LCH Investments. Readers should not interpret their trades to mean that Nvidia is a bad investment, but rather that diversification has its benefits. Here’s why the iShares Bitcoin Trust is a valuable long-term investment for risk-tolerant investors.

At any given time, the price of Bitcoin is determined by supply and demand. However, the supply is limited to 21 million coins, so demand is ultimately the driving force behind price action. In other words, demand for Bitcoin would have to increase substantially to push the price to $1 million, and even more substantially to push the price to $3.8 million.

Bernstein and Ark Invest believe that demand will come from spot Bitcoin ETFs, a brand new asset class approved by the SEC earlier this year. Spot Bitcoin ETFs track the price of Bitcoin by holding the cryptocurrency as the underlying asset, and they eliminate traditional sources of friction that may have kept retail and institutional investors out of the market, as discussed below.

  • Spot Bitcoin ETFs allow investors to add Bitcoin exposure through existing brokerage accounts. This eliminates the complexity of maintaining a separate portfolio with a cryptocurrency exchange. It also simplifies tax preparation, as most brokerages link directly to tax preparation software.

  • Spot Bitcoin ETFs tend to be cheaper. The iShares Bitcoin Trust has an expense ratio of 0.25%, meaning investors pay $25 per year for every $10,000 in the fund. But Coinbase charges 0.4% to 0.6% per trade for orders under $10,000, meaning investors face double the cost: once when they buy and again when they sell.

Bernstein and Ark Invest expect Bitcoin to go through several developments over the next decade, but they agree on one thing: demand from institutional investors will drive the predicted gains.

We’re still in the early stages of adoption, but institutional demand for spot Bitcoin ETFs is clearly visible in recent Forms 13F filings with the SEC. As noted, the top three hedge funds — Citadel Advisor, DE Shaw, and Millennium Management — have initiated positions in the iShares Bitcoin Trust. Several major investment banks, including JPMorgan Pursuit, Morgan StanleyAnd Wells Fargohave also invested in spot Bitcoin ETFs.

However, most institutional investors currently have very small positions, meaning their holdings represent insignificant portions of their portfolios. But Bernstein analysts Chhugani and Sapra believe that institutional investors “are evaluating ‘net long’ positions as they become more comfortable with improving ETF liquidity.”

Ark Invest’s Cathie Wood believes that institutional investors will eventually allocate just over 5% of their portfolios to spot Bitcoin ETFs. For comparison, institutions had nearly $120 trillion in assets under management last year, so Ark’s forecast implies that those investors will allocate more than $6 trillion to spot Bitcoin ETFs in the future. Should that happen, Wood says, Bitcoin’s price could reach $3.8 billion.

Bernstein is also bullish on Bitcoin given the halving that took place in April 2024. “We believe a new cycle that begins with a halving is not a coincidence, but is driven by unique supply-demand dynamics,” the analysts wrote in a recent note.

To break it down a bit, Bitcoin block subsidies — newly minted bitcoins awarded to miners for solving cryptographic puzzles to verify blocks of transactions — decrease by 50% every time 210,000 blocks are added to the blockchain. These halving events occur roughly every four years, with the most recent one occurring in April.

This is important because Bitcoin has gone through three halvings before and the price always peaked 12 to 18 months later, as seen in the chart below.

Half-life date

Peak efficiency

Time to peak efficiency

November 2012

10.485%

371 days

July 2016

3,103%

525 days

May 2020

707%

546 days

Source: Fidelity Digital Assets.

As shown above, post-halving returns have diminished with each subsequent halving, simply because each subsequent halving has a smaller impact on the total supply. But history suggests that Bitcoin will peak sometime between April 2025 and October 2025.

Past performance is never a guarantee of future returns, and price targets should never be taken for granted. Bitcoin is a relatively new asset class, and its limited track record means that predicting its performance is essentially impossible.

Additionally, Bitcoin has already fallen by over 50% multiple times, and similar declines are plausible (if not likely) in the future. Investors who are comfortable with these risks should consider buying a position in the iShares Bitcoin Trust today. Adding exposure to the cryptocurrency is a great way to diversify a portfolio loaded with AI stocks like Nvidia.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, JPMorgan Chase, and Nvidia. The Motley Fool has a Disclosure Policy.

Billionaires are selling Nvidia shares and buying an index fund that some Wall Street analysts say could rise 5,655%. Originally published by The Motley Fool

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