Hedge funds are selling NVIDIA to buy Bitcoin ETFs! Is Bitcoin breaking through one million US dollars not a dream?

According to the Smart Finance app, artificial intelligence (AI) has been one of the hottest investment themes on Wall Street this year. Among them, Nvidia (NVDA.US) has become the most sought-after stock in the field of machine learning processors due to its leading position. However, some Wall Street analysts see a new investment opportunity in the cryptocurrency field, as significant opportunities around Bitcoin are emerging with the approval of Bitcoin spot ETFs.

Bernstein's Gautam Chhugani and Mahika Sapra believe that by 2025, Bitcoin could reach $200,000, $500,000 by 2029, and $1 million by 2030. This forecast ultimately means that the price of Bitcoin could increase by 1415% from the current $66,000.

"Crypto Mom" Hester Woodsestimated last year that Bitcoin could reach $1.5 million by 2030, and after the approval of the Bitcoin spot ETF, she raised this number to $3.8 million. Her latest forecast implies a 5655% increase in Bitcoin compared to the current price.

Meanwhile, several successful hedge fund managers sold Nvidia stocks in the first quarter and instead bought iShares Bitcoin Trust (IBIT.US), one of the recently approved Bitcoin spot ETFs.

Ken Griffin of Citadel Advisors sold 2.4 million shares of Nvidia in the first quarter, reducing his stake by 68%. At the same time, he started to establish a small position in iShares Bitcoin Trust.

David Shaw of D.E.Shaw sold 1.4 million shares of Nvidia in the first quarter, reducing his stake by 38%. At the same time, he also bought into iShares Bitcoin Trust with a small position.

Israel Englander of Millennium Management sold 720,004 shares of Nvidia in the first quarter, reducing his stake by 35%. At the same time, he established a significant position in iShares Bitcoin Trust, making it his twelfth largest holding excluding options contracts.

According to data from LCH Investments, the reason why the above three billionaires are worth paying attention to is that they manage the three hedge funds with the highest net returns since their inception. While reducing Nvidia holdings does not mean that the stock is a bad investment, it is just part of diversification. However, the practice of building positions in iShares Bitcoin Trust may indicate that for investors with a strong risk tolerance, this is an asset worth holding for the long term Spot Bitcoin ETF is unleashing institutional investor demand

At any time, the price of Bitcoin is determined by supply and demand. However, its supply is limited to 21 million coins, so ultimately demand is the driving force behind price movements. In other words, for the price of Bitcoin to reach $1 million, demand needs to increase significantly, and for the price to reach $3.8 million, demand needs to surge even further.

Bernstein and Ark Investment believe that demand will come from spot Bitcoin ETFs, a new asset class approved earlier this year by the U.S. Securities and Exchange Commission (SEC). Spot Bitcoin ETFs track the price of Bitcoin by holding cryptocurrencies as underlying assets, eliminating traditional frictions that may deter retail and institutional investors from the market.

Spot Bitcoin ETFs allow investors to increase their Bitcoin exposure through existing brokerage accounts. This eliminates the complexity of maintaining a separate investment portfolio using cryptocurrency exchanges. It also simplifies tax reporting, as most brokerage firms are directly linked to tax preparation software.

Moreover, spot Bitcoin ETFs are typically cheaper. The expense ratio of iShares Bitcoin Trust is 0.25%, meaning investors only need to pay $25 per year for every $10,000 invested. However, for orders below $10,000, Coinbase charges a fee of 0.4% to 0.6% per transaction, and investors have to pay this higher fee twice - once when buying and once when selling.

Bernstein and Ark Investment expect Bitcoin to follow a different trajectory in the next decade, but they all agree that institutional investor demand will drive expected returns.

The adoption of cryptocurrencies is still in its early stages, but the demand for spot Bitcoin ETFs from institutions is evident in the 13F forms recently submitted to the SEC. As mentioned above, the top three hedge funds - Citadel Advisor, D.E. Shaw, and Millennium Management - have started building positions in iShares Bitcoin Trust. Several major investment banks, including JP Morgan, Morgan Stanley, and Wells Fargo, have also bought spot Bitcoin ETFs.

However, most institutional investors currently hold very small positions, meaning their stakes in their portfolios are negligible. But Bernstein analysts Chhugani and Sapra believe that institutional investors are "assessing 'net long' positions as they are satisfied with the improvement in ETF liquidity."

Similarly, Wood believes that institutional investors will ultimately allocate slightly more than 5% of their portfolios to spot Bitcoin ETFs. As a reference, assets managed by institutions approached $120 trillion last year, so Ark Investment's forecast implies that these investors will allocate over $6 trillion to Bitcoin ETFs in the future. Wood states that if this scenario unfolds, the price of Bitcoin could reach $3.8 million History indicates that Bitcoin will reach a new high between April and October 2025

Bernstein is also bullish on Bitcoin, as it experienced a halving event in April 2024. Analysts wrote in a recent report: "We believe that the new cycle starting from the halving is not a coincidence, but driven by unique supply and demand dynamics."

Specifically, the Bitcoin block subsidy - the issuance of new Bitcoins granted to miners for solving cryptographic puzzles to validate transaction blocks - decreases by 50% every 210,000 blocks. This halving event occurs approximately every four years, with the most recent one happening in April.

This is significant because Bitcoin has experienced three halving events before, and its price has always reached a new peak 12 to 18 months later.

As shown above, the returns after each halving event decrease with each subsequent halving, simply because the impact of each halving event on the total supply is relatively small. However, history indicates that Bitcoin will reach its peak between April and October 2025.

Investors still need to be cautious

Past performance is by no means a guarantee of future returns, and target prices should not be taken for granted. Bitcoin is a relatively new asset class, and its limited historical record means that predicting its performance is essentially impossible.

Furthermore, Bitcoin has experienced multiple declines of over 50% in the past, and similar declines could occur in the future