Several hedge fund billionaires purchased shares of the iShares Bitcoin Trust during the fourth quarter.
Analysts at AllianceBernstein and Standard Chartered estimate Bitcoin will hit $200,000 in 2025.
Bitcoin is theoretically a good hedge against inflation, and demand among institutional investors is increasing.
In the fourth quarter, the hedge fund billionaires listed below added to their positions in the iShares Bitcoin Trust(NASDAQ: IBIT), an exchange-traded fund (ETF) from BlackRock that tracks the spot price of Bitcoin.
Israel Englander of Millennium Management bought 6.3 million shares of the spot Bitcoin ETF, increasing his position 27%. The BlackRock fund is now the third largest holding in his portfolio, excluding options.
David Shaw of D.E. Shaw bought 7.4 million shares of the spot Bitcoin ETF, increasing his position 345%. The BlackRock fund now ranks among the top 25 holdings in his portfolio, excluding options.
Paul Tudor Jones of Tudor Investment bought 3.6 million shares of the spot Bitcoin ETF, increasing its position 82%. The BlackRock fund now ranks as the largest holding in the portfolio, excluding options.
Importantly, Gautam Chhugani at AllianceBernstein estimates Bitcoin will reach $200,000 in 2025. And Geoff Kendrick at Standard Chartered has set the cryptocurrency with the same target.
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Those forecasts imply 110% upside from its current price of $95,000. They also imply equivalent upside in the iShares Bitcoin Trust. Here's what investors need to know.
Image source: Getty Images.
Why Bitcoin could rocket to $200,000 by the end of 2025
Gautam Chhugani and Geoff Kendrick have outlined similar investment theses for Bitcoin. Its price is tightly correlated with demand, and demand should increase as retail investors reallocate from gold to Bitcoin amid heightened economic uncertainty created by President Donald Trump's trade war. Additionally, Chhugani and Kendrick expect growing demand from institutional investors to continue throughout the year.
Bitcoin as an inflation hedge
Economists expect sweeping tariffs imposed by the Trump administration to raise U.S. inflation. Bitcoin is often referred to as digital gold because its limited supply theoretically makes it a good hedge against inflation.
However, the cryptocurrency has a mixed record on that front. Its price more than doubled over the two-year period ended June 2022, as CPI inflation rose 8.5 percentage points. But zooming in on that period shows that Bitcoin fell 57% during the six months ended June 2022, as CPI inflation rose 2 points.
Bitcoin as an institutional asset
As mentioned, several wealthy hedge fund managers added Bitcoin exposure to their portfolios in the fourth quarter, but the trend isn't limited to those professionals. Since spot Bitcoin ETFs won approval from the SEC in January 2024, they've been adopted by institutional investors faster than any ETF in history, according to Bitwise CIO Matt Hougan. Indeed, Forms 13F show the number of large asset managers with Bitcoin exposure nearly doubled in the last two quarters.
Why the BlackRock iShares Bitcoin Trust is a simpler alternative to Bitcoin
Spot Bitcoin ETFs like the iShares Bitcoin Trust have increased demand for Bitcoin by reducing traditional sources of friction. Investors no longer need a distinct account with a cryptocurrency exchange, nor do they have to pay exorbitant fees on every transaction to get exposure to Bitcoin.
Instead, spot Bitcoin ETFs let investors add the cryptocurrency to their existing portfolios held with traditional brokers, and several funds have relatively low expense ratios. For instance, the iShares Bitcoin Trust charges just 0.25% annually. Comparatively, Coinbase charges 0.6% on transactions involving up to $10,000, and 0.4% on transactions involving between $10,000 and $50,000.
In closing, Bitcoin has been a phenomenal investment in recent years. Its price has increased 240% since May 2023. Comparatively, gold increased 45% and the S&P 500(SNPINDEX: ^GSPC) returned 40% over the same period.
However, Bitcoin was also the most volatile asset. Its price fell more than 25% from a record high twice during that time. But gold never dropped more than 4%, and the S&P 500 never fell more than 19%.
Investors who are comfortable with that volatility should consider buying a small position in BlackRock's iShares Bitcoin Trust today.
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Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool recommends Standard Chartered Plc. The Motley Fool has a disclosure policy.
