Billionaires are snapping up this cryptocurrency, which could soar 200% in the next 12 months, according to an investment firm

After trading down or sideways for most of the past seven months, Bitcoin (BTC -1.32%) may finally be ready for a big breakthrough. Investment firm Bernstein just released a report detailing all the reasons it believes the stock could reach a new all-time high of $200,000 by the end of 2025.

Based on the current price of Bitcoin, which is around $68,000, this would represent a gain of almost 200%. As a result, billionaire investors seem to be rushing to buy cryptocurrency right now. The most prominent of these include hedge fund managers and tech entrepreneurs, and all seem to believe that Bitcoin is poised for a big rally after the 2024 presidential election. So, could they be right?

Which billionaires buy bitcoins?

Michael Saylor, Executive Chairman Micro strategy (MSTR -0.66%)perhaps the greatest of the billionaire bulls. Last summer at a Bitcoin conference in Nashville, Tennessee, he predicted that the digital coin could be worth $13 million by 2045. And he continues to aggressively buy MicroStrategy, to the point where the company now owns more than 1% of all bitcoins in the world.

Other tech billionaires are also jumping into bitcoin, in particular Mark Kuban and Jack Dorsey, supervisor Block. So are Silicon Valley’s top venture capitalists, some of whom are now running for president in 2024. Dorsey recently predicted that the price of the cryptocurrency could reach $1 million by 2030 in a sign of their bullish outlook for the cryptocurrency.

Finally, there are the billionaire hedge fund managers who are loaded with new spot bitcoin exchange-traded funds (ETFs). Based on 13F data from the Securities and Exchange Commission, you can piece together which funds are buying it, as well as how much they own.

One of the more popular names to watch out for is Millennium Management, led by billionaire Israel Englander, which launched a $2 billion bitcoin ETF earlier this year. In total, there are now more than 600 investment firms that hold significant holdings of Bitcoin ETFs.

Why are billionaires buying bitcoins?

Based on the above, it is easy to conclude that these billionaires are buying bitcoins mainly because they expect their price to rise significantly in the short term. In the crypto industry this is known as “Number Go Up”. You buy Bitcoin because you hope its price will go up, and you don’t care why.

But this probably paints an overly simplistic picture of billionaire buying activity. As part of his $200,000 Bitcoin price prediction, Bernstein laid out a number of good reasons to buy it.

Image source: Getty Images.

The first is what Bernstein calls a “new institutional era” for Bitcoin. This includes large-scale buy-in from institutional investorswhich now consider cryptocurrency as a separate asset class. And it also includes the launch of new spot bitcoin ETFs.

According to Bernstein, this new institutional era means that Wall Street institutions and billionaire investors will become the largest holders of Bitcoin. With all this new money pouring into Bitcoin, the price is likely to skyrocket.

A second factor is the growing awareness that Bitcoin can serve as a hedge against uncertainty. If you’re worried about hyperinflation, you buy Bitcoin. If you’re worried about the US government’s $35 trillion debt, you buy Bitcoin. If you are concerned about geopolitical tensions in the Middle East, you buy Bitcoin.

So, for example JPMorgan Chase (JPM -1.19%) talked about what he calls the “humiliation trade.” This is, first of all, about the fall of the US dollar, as well as the growth of instability in the world. To hedge your risk, you move your money into bitcoins and other assets that are considered more stable. In a recent report, JPMorgan Chase suggests that this bearish trade will continue through 2025, boosting the prices of both gold and bitcoin.

How to think like a billionaire investor

Of course, you shouldn’t buy bitcoins just because rich billionaires do. But of course you have to learn to think like a billionaire. Instead of relying on the simplistic argument of “quantity is increasing,” you can build a much more sophisticated argument for why you should buy cryptocurrency.

From my perspective, the appeal of Bitcoin is that it can function as both a “risky” asset and a “risk-free” asset. In other words, Bitcoin can thrive when bull market sentiment prevails, but also offer protection in bear markets. For this reason, I am bullish on Bitcoin until 2025. By the end of next year, we could be talking about a digital asset trading around $200,000.