Billionaires Are Selling Palantir Stock and Buying an Index Fund That May Soar Up to 54,300%, According to Certain Wall Street Experts

Investors should never take price targets too seriously, especially when they seem too good to be true (like the ones above). But the iShares Bitcoin Trust warrants further consideration given the upside baked into the price targets above.

The investment thesis for Bitcoin is simple: Like any asset, its price is a function of supply and demand. But demand is the most important variable in this case because Bitcoin’s supply is limited to 21 million coins. So, the cryptocurreny will become more valuable as demand rises and less valuable as demand falls. And spot Bitcoin ETFs could be a game changer where demand is concerned.

Spot Bitcoin ETFs reduce friction by eliminating the need for cryptocurrency exchange accounts (and the high fees associated with them), while also legitimizing Bitcoin to a certain degree. That is important because a recent survey shows 63% of U.S. adults lack confidence in cryptocurrency’s safety, according to Pew Research. Spot Bitcoin ETFs provide a more familiar onramp for those potential retail investors.

Similarly, spot Bitcoin ETFs also reduce friction for institutional investors, a group with $120 trillion in assets under management. If even a small percentage of those assets were put in Bitcoin, its price would soar. For instance, Cathie Wood estimates Bitcoin would be worth $3.8 million if institutions allocated a little over 5% of their assets, an outcome she sees a likely in the years ahead.

Importantly, while we are still in the early days of adoption, spot Bitcoin ETFs have already spurred demand. After winning SEC approval in January, spot Bitcoin ETFs became the most successful ETF launch in history, according to Gautam Chhugani. And the iShares Bitcoin Trust has been the most impressive of the group. It reached $10 billion in assets faster than any ETF on record, according to The Wall Street Journal.

Spot Bitcoin ETFs could help drive Bitcoin’s price much higher in the future, and they offer a valuable source of diversification at a time when many stocks are rather expensive — Palantir is a good example. But investors should bear in mind that cryptocurrency is a relatively nascent asset class that is prone to extreme volatility.

Indeed, Bitcoin has declined more than 30% from a record high on six separate occasions in the last decade, and it often took more than a year to recover. Similar drawdowns are probable in the future. Investors should be comfortable with that before putting money into Bitcoin (or spot Bitcoin ETFs).

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Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Bitcoin and Palantir Technologies. The Motley Fool has a disclosure policy.

Billionaires Are Selling Palantir Stock and Buying an Index Fund That May Soar Up to 54,300%, According to Certain Wall Street Experts was originally published by The Motley Fool