Artificial intelligence stocks have stolen the spotlight in recent months, but Bitcoin could be one of Wall Street’s next obsessions.

Artificial intelligence (AI) has been one of the hottest investment topics on Wall Street this year, and Nvidia (NVDA -2.61%) has become the quintessential AI stock due to its leadership in machine learning processors. But certain Wall Street analysts see a substantial opportunity taking shape around Bitcoin (BTC 0.58%) due to the recent approval of spot Bitcoin ETFs.

• Gautam Chhugani and Mahika Sapra of Bernstein believe that Bitcoin could reach $200,000 by 2025, $500,000 by 2029, and $1 million by 2030. This prediction ultimately implies a 1,415% upside from its current price of $66,000.
• Last year, Cathie Wood estimated that Bitcoin could reach $1.5 million by 2030, but she increased that number to $3.8 million following the approval of spot Bitcoin ETFs. Her latest prediction implies a 5,655% upside from the current price.

Several successful hedge fund managers sold Nvidia shares during the first quarter while simultaneously buying shares of iShares Bitcoin Investment Fund (I BITE 6.02%), one of the recently approved spot Bitcoin ETFs.

• Citadel Advisors’ Ken Griffin sold 2.4 million shares of Nvidia in the first quarter, reducing his holdings by 68%. Meanwhile, he started a small position in the iShares Bitcoin Trust.
• David Shaw of DE Shaw sold 1.4 million shares of Nvidia in the first quarter, reducing his holding by 38%. Meanwhile, he started a small position in the iShares Bitcoin Trust.
• Millennium Management’s Israel Englander sold 720,004 shares of Nvidia in the first quarter, reducing his holding by 35%. Meanwhile, he started a fairly sizable position in the iShares Bitcoin Trust, so that ranks as his twelfth-largest holding, excluding options contracts.

The three billionaires mentioned above are notable because they run the top three hedge funds, measured by net gains since inception, according to LCH Investments. Readers should not interpret their trades as a bad investment in Nvidia, but rather that diversification has merit. Here’s why the iShares Bitcoin Trust is a worthwhile long-term holding for risk-tolerant investors.

Spot Bitcoin ETFs are unlocking demand from institutional investors

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

Bernstein and Ark Invest believe demand will come from Spot Bitcoin ETFsa new asset class approved by SEC earlier this year. Spot Bitcoin ETFs track the price of Bitcoin while keeping the cryptocurrency as the underlying asset and eliminate traditional sources of friction that may have kept retail It is institutional investors off the market, as detailed below.

• Spot Bitcoin ETFs allow investors to add exposure to Bitcoin through their existing brokerage accounts. This eliminates the complexity of maintaining a separate portfolio with a cryptocurrency exchange. It also simplifies tax filing because most brokerages link directly to tax preparation software.
• Spot Bitcoin ETFs are often cheaper. The iShares Bitcoin Trust has a Expense rate of 0.25%, which means investors will pay $25 per year for every $10,000 in the fund. But Coinbase charges 0.4% to 0.6% per transaction for orders under $10,000, meaning investors are hit with higher fees twice — once when they buy and once when they sell.

Bernstein and Ark Invest expect Bitcoin to follow different trajectories over the next decade, but they agree on one thing: demand from institutional investors will drive the anticipated gains.

We are still in the early stages of adoption, but institutional demand for spot Bitcoin ETFs has been evident in recent years. 13F Forms filed with the SEC. As mentioned, three major hedge funds — Citadel Advisor, DE Shaw, and Millennium Management — have initiated positions in the iShares Bitcoin Trust. Several major investment banks, including JP Morgan To chase, Morgan StanleyIt is Wells Fargoalso bought spot Bitcoin ETFs.

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

Similarly, Cathie Wood at Ark Invest believes that institutional investors will eventually put a little over 5% of their portfolios into spot Bitcoin ETFs. For context, institutions had nearly $120 trillion in assets under management last year, so Ark’s forecast implies that these investors will allocate more than $6 trillion to spot Bitcoin ETFs in the future. If that happens, Wood says the price of Bitcoin could reach $3.8 trillion.

History Says Bitcoin Will Hit New Highs Between April 2025 and October 2025

Bernstein is also bullish on Bitcoin because of the halving event which occurred in April 2024. “We believe that a new cycle starting with the halving is not a coincidence, but rather driven by unique supply and demand dynamics,” the analysts wrote in a recent note.

To elaborate, Bitcoin block subsidies — newly minted Bitcoin granted to miners to solve cryptographic puzzles to verify transaction blocks — are reduced by 50% every time 210,000 blocks are added to the blockchain. These halving events happen roughly once every four years, and the most recent one occurred in April.

This is significant because Bitcoin has already experienced three halving events before, and its price has always reached a new peak 12 to 18 months later, as shown in the chart below.

Halving date

Peak return

Time to return to the peak

Source: Fidelity Digital Assets.

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

A Word of Caution for Investors

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 history means that predicting its performance is essentially impossible.

Furthermore, Bitcoin has fallen by more than 50% on multiple occasions, and similar declines are plausible (if not likely) in the future. Investors 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 overloaded with AI stocks like Nvidia.

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.

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