In this article we discuss the 5 best cryptocurrencies to invest in according to hedge fund billionaires. If you want to read our detailed analysis of these currencies, go directly to the 10 Best Cryptocurrencies to Invest in According to Hedge Funds.
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5. Litecoin
Litecoin, released in 2011, is also a Bitcoin spinoff that also offers faster transactions and lower fees compared to Bitcoin on its network. It is ranked fifth on our list of 10 best cryptocurrencies to invest in according to hedge fund billionaires. It is based on a proof-of-work mechanism and is one of the most popular cryptocurrencies on the market, hitting a market cap of more than $10 billion in January this year. It is presently the sixth-largest cryptocurrency in the world despite being a Bitcoin spinoff.
Grayscale, a leader in digital currency investing, has been loading up alternative coins like Litecoin as Bitcoin and Ethereum fall in value. Grayscale bought 80% of all Litecoin mined in February. This purchase took the total number of altcoin holdings by Grayscale to 1.44 million, which equated to close to $250 million in value. As Bitcoin alternatives become more popular, Litecoin value is expected to grow sharply in the coming weeks and months.
Alphabet Inc. (NASDAQ: GOOG) is connected to the Litecoin story as a former employee at the firm, named Charlie Lee, was one of the founders of the cryptocurrency. Alphabet Inc. (NASDAQ: GOOG) is one of the largest corporate investors in crypto and has consistently backed the rise of the new technology over the years.
At the end of the first quarter of 2021, 159 hedge funds in the database of Insider Monkey held stakes worth $29 billion in Alphabet Inc. (NASDAQ: GOOG), up from 157 in the previous quarter worth $20 billion.
Polen Global Growth Fund, in its Q1 2021 investor letter, mentioned Alphabet Inc. (NASDAQ: GOOG). Here is what Polen Global Growth Fund has to say about Alphabet in its letter:
“For our top contributors, each generated strong returns for different, but fundamentally based reasons, in our opinion. Alphabet saw renewed strength recently as advertisers generally resumed spending after a short pause during the pandemic.
Alphabet experienced some challenging quarters in 2020 as many companies paused their advertising spend. But, the business bounced back recently, spurring a strong recovery in the company’s share price. Even during such a challenging period, the company still compounded revenue at 14% in constant currency for 2020.
This is partly due to Alphabet’s multiple growth engines. For example, while its search business was negative one quarter and only grew by 6% during another, YouTube ads and Google Cloud Platform (GCP) grew at over 30% and 46% during the quarter, respectively. YouTube and GCP combined now contribute over 50% of the company’s growth, which we believe is a testament to a strong culture of innovation, a long-term mindset, and prudent capital allocation. With search bouncing back this most recent quarter–growing 17% –we believe that Alphabet continues to be well-positioned to durably compound earnings at or above 15% for many years to come. It remains one of our largest positions.”
4. Polkadot
Polkadot is a proof-of-stake crypto network that markets itself as a connector among public blockchain networks. It is placed fourth on our list of 10 best cryptocurrencies to invest in according to hedge funds. The network allows different systems to work under one roof. Polkadot also offers developers using its platform the ability to use the security system of Polkadot for their new digital currencies, thereby making new currencies less susceptible to attacks or hacking from the outside.
As Bitcoin price falls, investors are looking for new crypto investments with explosive growth potential. One of these is certainly Polkadot, with news reports suggesting that FD7 Ventures, a Dubai-based hedge fund with more than $1 billion in assets under management, is considering selling the $750 million in Bitcoin it held in favor of buying Polkadot. This move is part of a plan by the fund to diversify investment in the crypto market that is rapidly expanding across the globe.
American electric vehicle maker Tesla, Inc. (NASDAQ: TSLA) is one of the first big companies to directly accept crypto payments for sales. However, it has halted these transactions temporarily amid environmental concerns around coin mining operations. Tesla, Inc. (NASDAQ: TSLA) holds more than $1 billion in Bitcoin.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based firm Citadel Investment Group is a leading shareholder in Tesla, Inc. (NASDAQ: TSLA) with 24 million shares worth more than $16 billion.
Here is what Baron Partners Fund has to say about Tesla, Inc. (NASDAQ: TSLA) in its Q1 2021 investor letter:
“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, energy storage solutions, and battery cells. The stock fell during the quarter as a result of general market dynamics and a potential production slowdown due to parts shortages. A refreshed S/X and China Model Y ramp could also have a negative impact on margins in early 2021. We anticipate strong growth and improved margins driven by new production capacity, manufacturing efficiencies, localization of its manufacturing and supply chain, and maturation of Tesla’s full self-driving technology.”
3. Ripple
Ripple, released in 2012, is a cryptocurrency made by Ripple Labs. It is ranked third on our list of 10 best cryptocurrencies to invest in according to hedge funds. Ripple uses a lean mechanism for hosting transactions of its network, and is one of the most popular cryptocurrencies on the market today. Ripple Labs has developed the Ripple exchange and the Ripple remittance network as well to complement the success of the cryptocurrency.
Despite the hype around the two largest cryptocurrencies, Bitcoin and Ethereum, smaller ones like Ripple also have strong growth fundamentals that smart investors would do well to notice. As early as 2017, tech mogul Michael Arrington had announced the Arrington XRP Capital, a $100 million hedge fund focused on the Ripple cryptocurrency that has since exploded in value and added other cryptocurrencies to its profile to build on the Ripple success.
Ripple and many other cryptocurrencies have also grown thanks to the trust shown in blockchain technology by companies like American payments firm Square, Inc. (NYSE: SQ). Square, Inc. (NYSE: SQ) reportedly holds more than $400 million in crypto assets and has seen share price fall in recent weeks amid a broader market downturn around crypto-related stocks in general.
At the end of the first quarter of 2021, 92 hedge funds in the database of Insider Monkey held stakes worth $9.2 billion in Square, Inc. (NYSE: SQ), up from 89 in the preceding quarter worth $8.8 billion.
2. Ethereum
Ethereum is the second most popular cryptocurrency in the world built on a blockchain-based network that allows for the development of secure products without any third-party interference or other problems like downtime. It is placed second on our list of 10 best cryptocurrencies to invest in according to hedge funds. Ethereum is being cited as one of the potential contenders to Bitcoin as the most popular cryptocurrency in the world because of the improved stability and security options it offers compared to Bitcoin.
On March 21, business news publication Bloomberg reported that hedge funds in Europe were loading up on Ethereum as Bitcoin plunged in value, betting on the cryptocurrency to challenge Bitcoin dominance in the market in the coming months. Some of the famous funds cited in the report included United Kingdom-based MVPQ Capital and France-based Blocklabs Capital Management, both of which have backed blockchain to succeed in finance markets outside the United States.
Ethereum is one of the most popular cryptocurrencies in the world and is supported by payments companies like PayPal Holdings, Inc. (NASDAQ: PYPL). PayPal Holdings, Inc. (NASDAQ: PYPL) has so far added support for only four big cryptocurrencies for transactions after announcing earlier this year that it would allow users to checkout with crypto.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in PayPal Holdings, Inc. (NASDAQ: PYPL) with 12 million shares worth more than $2.9 billion.
1. Bitcoin
Bitcoin is the most expensive and widely used cryptocurrency globally built on a blockchain-based network. It is placed first on our list of 10 best cryptocurrencies to invest in according to hedge fund billionaires. The currency leads the other digital currencies in terms of market capitalization, user base, and popularity, as well as ease of use since many companies around the world accept Bitcoin as payment for sales. The price of Bitcoin has fallen in recent weeks amid speculation around the energy-intensive coin mining methods it is reliant on.
On May 24, Ray Dalio, the billionaire founder of Bridgewater Associates, told news publication CoinDesk that he owned some Bitcoin and had started leaning towards the cryptocurrency as a shield against inflation instead of bonds. However, Dalio has also cautioned that the nature of the new technology and the speed at which it is growing means that a government crackdown against it is all but inevitable in the near future, something that investors should consider before buying into the new trend.
Bitcoin also has a strong backer in American software giant Microsoft Corporation (NASDAQ: MSFT) that was one of the first tech firms to allow users to use cryptocurrencies for payments on internet stores owned by the company. Microsoft Corporation (NASDAQ: MSFT) markets products like Windows software that generate a lot of revenue through sales on online stores.
At the end of the first quarter of 2021, 251 hedge funds in the database of Insider Monkey held stakes worth $58.9 billion in Microsoft Corporation (NASDAQ: MSFT), down from 258 the preceding quarter worth $52.8 billion.
In its Q1 2021 investor letter, Polen Capital, an investment management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ: MSFT) was one of them. Here is what the fund said:
“We have written extensively about Microsoft in recent commentaries. It was our leading contributor last year and one of our largest weightings within the Portfolio. It continues to experience business momentum through several dominant, essential, and competitively advantaged businesses, like Office 365 and Azure. The markets it competes for are enormous, which gives the company the ability to compound at scale. In the past quarter alone, the company generated over $40 billion in revenue, representing a 17% growth rate. The inherent operating leverage in Microsoft’s business model continues and led to 34% earnings growth this past quarter. Despite the broad rotation we saw in the first quarter and Microsoft’s robust performance in 2020, we think its business fundamentals continue to exhibit strength, and the stock continues to reflect the fundamentals.”
You can also take a peek at 10 Blue Chip Dividend Stocks Hedge Funds Are Buying and 14 Best European Dividend Stocks To Buy.
