Billionaires Are Buying an ETF That Could Soar 18,234% If Michael Saylor of Strategy Is Right

Exchange-traded funds (ETFs) have become all the rage in the stock market because they are traded like stocks and allow investors to easily gain exposure to a wide range of assets or even a basket of assets. Everyone, from retail investors to billionaires and their hedge funds, buy them.

When billionaires buy a stock or ETF, it is often viewed by the market as a bullish indicator. While it certainly can be, investors should make sure to do their own due diligence, because these investments are usually at least a few months old when the public finds out about them. Nevertheless, looking at what billionaires invest in can be a great source of inspiration for new ideas.

Recently, billionaires have been piling into an ETF that could soar 18,234% over time if Strategy's (NASDAQ: MSTR) executive chairman Michael Saylor is right. Let's take a look.

The forever Bitcoin bull

If anyone has a right to be bullish on Bitcoin, the world's largest cryptocurrency, it's Saylor. In 2020, Saylor decided to invest most of the remaining capital at Strategy, which at the time was known as MicroStrategy and was a business software company, in Bitcoin, becoming the first Bitcoin treasury company. Eventually, Saylor would persuade capital markets to essentially lend to the company so Strategy could buy Bitcoin. The strategy paid off big time, and the company's stock is up close to 1,800% over the past five years.

Image source: Getty Images.

Now, Strategy owns roughly 3% of all bitcoins outstanding, and Saylor is as bullish on Bitcoin as he's ever been.

Billionaire investors have also grown bullish on Bitcoin and been investing through the iShares Bitcoin Trust ETF (NASDAQ: IBIT), a spot-Bitcoin ETF that attempts to mirror Bitcoin's price by actually buying the coin and issuing shares based on an investor's individual purchase. Here are a few billionaires that increased their position in the ETF in the second quarter of the year:

• Philippe Laffont's fund Coatue Management initiated a new position, purchasing more than 56.5 million shares.
• David Shaw's fund D.E. Shaw also increased its position in the quarter by 81% and now owns more than 14.7 million shares.

At a crypto conference earlier this year, Saylor said he thinks Bitcoin can reach $21 million per token by the year 2046, implying 18,234% upside from current levels. He said:

Twenty-one million coins at a $21 million price in 21 years. And people ask, how's the network going to grow? It's going to be growing at 21% in 21 years. The volatility is going to be 21. The only number you need to remember is the number 21.

The significance of 21 is that there will only ever be 21 million Bitcoin coins mined. Saylor has also said in previous interviews that he thinks Bitcoin will continue to make up a larger percentage of the world's total wealth, and that it can keep generating strong annual returns, which will have a powerful compounding effect over time.

Billionaires clearly like Bitcoin because of an improving regulatory environment. They are also increasingly viewing Bitcoin as a store of value, and therefore a form of digital gold.

The price of gold has rocketed higher in recent years, due to geopolitical tensions and growing concern around the U.S. government's enormous debt load, which results in crushing interest payments each year that are taking a bigger bite out of the annual federal budget. This has made some investors concerned that the government may not be able to make its debt payments at some point down the line, making longer-dated U.S. Treasury bonds less attractive.

Can Bitcoin actually ascend to $21 million?

Saylor was clearly right on Bitcoin five years ago, but his wildly bullish predictions more recently seem to be based on napkin math or driven by extreme exuberance. That's not to say Bitcoin won't be a good investment, but making long-term price predictions is not easy, especially when it comes to a volatile asset like crypto that doesn't generate traditional cash flows or earnings.

I do, however, think investors can continue to buy Bitcoin as a potential hedge against a worsening U.S. debt situation or higher inflation, which could reignite in the near term or remain elevated.

Bram Berkowitz has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.