According to the Financial Intelligence App, artificial intelligence (AI) has been one of the hottest investment themes on Wall Street this year, with Nvidia (NVDA.US) becoming the hottest stock in the field due to its leading position in machine learning processors. However, some Wall Street analysts see a new investment opportunity in the cryptocurrency field, saying that a significant opportunity is emerging around Bitcoin as Bitcoin spot ETF has been approved.

Bernstein's Gautam Chhugani and Mahika Sapra believe that Bitcoin may reach $200,000 by 2025, $500,000 by 2029, and $1 million by 2030. This prediction ultimately means that Bitcoin's price has 1,415% upside potential compared to its current price of $66,000. "Wood Sister" Cathy Wood also gave her own prediction last year, estimating that Bitcoin may reach $1.5 million by 2030, and she raised this number to $3.8 million after the Bitcoin spot ETF was approved. Her latest prediction implies that Bitcoin will rise 5,655% from its current price.

"Wood Sister" Cathy Wood also gave her own prediction last year, estimating that Bitcoin may reach $1.5 million by 2030, and she raised this number to $3.8 million after the Bitcoin spot ETF was approved. Her latest prediction implies that Bitcoin will rise 5,655% from its current price.

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

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

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

Israel Englander of Millennium Management sold 720,004 shares of Nvidia stock in the first quarter, reducing his stake by 35%. At the same time, he established a considerable position in iShares Bitcoin Trust, making it his twelfth largest holdings besides 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 top three hedge funds in terms of net income since their inception. Although reducing Nvidia's stocks does not mean that the stock is a bad investment, this is just part of diversification, but buying iShares Bitcoin Trust may indicate that this is an asset worth holding for investors with strong risk tolerance in the long-term.

Bitcoin spot 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, so demand is ultimately the driving force behind price trends. In other words, the demand for Bitcoin needs to increase significantly for its price to reach $1 million, and for its price to reach $3.8 million, demand needs to further surge.

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

Bitcoin spot ETF allows investors to increase their exposure to Bitcoin 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, Bitcoin spot ETFs are usually cheaper. iShares Bitcoin Trust's expense ratio is 0.25%, which means that investors only need to pay $25 per year for every $100,000 invested. However, for orders below $100,000, 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 different trajectories over the next decade, but they agree that institutional investor demand will drive expected returns.

The popularity of cryptos is still in its early stages, but the demand for bitcoin spot ETFs from institutions is evident in the Form 13F 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 JPMorgan, Morgan Stanley, and Wells Fargo & Co have also bought into the bitcoin spot ETF.

However, the positions of most institutional investors are currently small, which means that their shares in their portfolios are negligible. But Bernstein analysts Chhugani and Sapra believe that institutional investors "are evaluating net long positions as they are satisfied with the improvement in ETF liquidity".

Similarly, Wood believes that institutional investors will eventually allocate slightly more than 5% of their portfolios to the bitcoin spot ETF. As a backdrop, institutional assets under management approached $120 trillion last year, so Ark Investment's forecast means that these investors will allocate over $6 trillion to the bitcoin ETF in the future. Wood says that if this happens, the price of bitcoin could reach $3.8 million.

History has shown that bitcoin will reach a new high between April and October 2025.

Bernstein is also bullish on bitcoin because of its halving event in April 2024. Analysts wrote in a recent report, "We believe that the new cycle starting with halving is not a coincidence, but driven by unique supply and demand dynamics".

Specifically, every time 0.21 million blocks of bitcoin are added, the block reward that is granted to miners for solving cryptographic puzzles and verifying transaction blocks for new bitcoin issuance is reduced by 50%. This halving event occurs approximately every four years, with the most recent one happening in April.

This is important because bitcoin has experienced three previous halving events, and its price has always reached a new peak 12 to 18 months later.

As shown above, the post-halving return decreases with each halving event, simply because each halving event has a smaller impact on the total supply. But history has shown that bitcoin will reach its peak between April and October 2025.

Investors still need to be cautious.

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

In addition, bitcoin has fallen more than 50% several times, and similar declines in the future are also possible.