Billionaires are buying these two cryptocurrencies

With the emergence of cryptocurrency as an asset class in its own right, a growing number of billionaires are now looking for potential investment opportunities. Some of them buy cryptocurrencies for their enormous growth potential, while others buy them for their ability to diversify a portfolio or hedge their overall market position.

Based on public statements and official 13F filings with the Securities and Exchange Commission (SEC), it’s possible to get a snapshot of what top billionaires are buying. Unsurprisingly, Bitcoin (BTC -2.08%) and Ethereum (ETH -2.32%) are at the top of their shopping lists.

1. Bitcoin

Hedge fund billionaires Stanley Druckenmiller and Paul Tudor Jones are two high-profile names making the case for why Bitcoin should become part of a diversified portfolio. As Druckenmiller pointed out, Bitcoin has many of the same properties as gold, which makes it interesting as a potential long-term store of value. And Paul Tudor Jones has argued that Bitcoin can be a way to hedge against geopolitical and macroeconomic risk.

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Billionaire hedge fund managers have emerged as some of the biggest buyers of the new Bitcoin exchange-traded funds (ETFs) at sight. Based on bi-weekly market data from CoinShares, it’s possible to see at a glance which hedge funds are the biggest buyers.

Some of them — such as Jane Street and Susquehanna International Group — may be familiar names to regular readers The Wall Street Journal. Others, such as Boston-based Bracebridge Capital — which is run by the richest female hedge fund manager in the US — may be less familiar. But what they all have in common is that they charge Bitcoin.

And don’t forget billionaire Larry Fink BlackRock Inc. (NYSE: BLK)which manages over $10 trillion in assets. In June 2023, BlackRock was the first to file a spot Bitcoin ETF application with the SEC. That ETF — iShares Bitcoin Trust (NASDAQ: IBIT) — is now the most popular spot Bitcoin ETF. Fink is also a regular guest on CNBC, explaining why average investors should invest in Bitcoin.

Much of the billionaire demand for Bitcoin is driven by its growth potential. The growing consensus is that Bitcoin now has a path to $150,000 by the end of 2025. And from there, the sky is the limit. Ark Invest’s Cathie Wood, for example, has suggested that Bitcoin could be worth as much as $3.8 million per coin by 2030.

2. Ethereum

Although Bitcoin has gotten the most attention from billionaires, don’t sleep on Ethereum. Arguably, Ethereum gives you much more diversification than Bitcoin because it is much more involved in every facet of the blockchain world. Ethereum is a blockchain network with smart contracts. It’s a building block for everything from games and non-fungible tokens (NFTs) to metaverse worlds.

But what billionaires like most about Ethereum is its potential to disrupt the traditional world of Wall Street. This is due to the huge advances made in decentralized finance (DeFi), which can be considered the blockchain version of traditional finance. For example, traditional finance has centralized exchanges such as Coinbase Global (NASDAQ: Coin)while DeFi has decentralized exchanges like Uniswap (CRYPTO: UNI).

Some of the best numbers on Ethereum’s disruptive potential come from Cathie Wood of Ark Invest. In this year’s “Big Ideas 2024” report, she highlighted exactly how much value is flowing from traditional finance to decentralized finance, specifically smart contract blockchain networks like Ethereum. Wood suggests that DeFi could grow at an annualized rate of 32% over the next few years, making it a $5.2 trillion market opportunity by 2030.

If you’re looking for a billionaire Ethereum evangelist, look no further than Mark Cuban. Based on his experience as a tech entrepreneur and angel investor, he is well positioned to discuss the benefits of Ethereum. Cuban has been beating the drum for Ethereum since 2021, when he praised its versatility and technological sophistication.

Are billionaires buying altcoins?

Based on the above, you might conclude that billionaires only buy Bitcoin and Ethereum. This is not necessarily the case. If you look at the latest data from CoinShares, a handful of other cryptocurrencies seem to be catching the attention of big institutional investors. These include Solana (CRYPTO: SOL), Litecoin (CRYPTO: LTC), XRP (CRYPTO: XRP)and Cardano (CRYPTO: ADA).

However, the amount of money flowing into these altcoins seems trivial in comparison. For example, more than $8 billion has flowed into Bitcoin since the beginning of the year, and nearly $1 billion into Ethereum. In comparison, $34 million was in Litecoin, $31 million in Solana, $22 million in XRP, and $12 million in Cardano.

This strategy of loading up on Bitcoin and Ethereum while making relatively small crypto investments elsewhere is probably one that makes sense for the average investor. You’ll get the best of both worlds: enormous growth potential combined with additional diversification for your portfolio.