Riding the Spot Bitcoin ETF Wave — Evening Brief – 05.21.24
Spot Bitcoin exchange-traded funds (ETFs) are gaining traction with institutional investors, according to a new note from Bitwise Asset Management CIO Matt Hougan.
In total, 563 investment firms revealed $3.5 billion in spot Bitcoin ETF holdings as of May 9, wrote Hougan in a blog post, which cites 13-F filings for the 11 ETFs permitted for trading by the Securities and Exchange Commission in January.
According to Hougan, most professional investors analyze cryptocurrency over six to 12 months, including phases of due diligence, personal allocation, isolated client allocations, and platform-wide allocations.
“Beginning about six months after the initial allocation, many firms begin allocating across their entire book of clients, with allocations ranging from 1% to 5% of the portfolio,” Hougan wrote.
“The great promise of bitcoin ETFs is that they can open the door for professional investors to buy bitcoin en masse, dramatically increasing the pool of capital investing in the asset,” he added.
While professional investors control only 7% to 10% of total BTC ETF assets, retail investors continue to hold most of the float, according to Hougan. However, this could be only the start of larger institutional allocations.
Hougan cites several big-name managers who own the product, including registered investment advisory giant Hightower Advisors, which has a $86 million stake, hedge fund Bracebridge Capital, which owns $434 million in ETFs, and Cambridge Investment Research, which has invested $40 million.
Hougan anticipates the number of firms will exceed 700, bringing the total assets under management close to the $5 billion held by institutional investors.
Financial behemoths such as Morgan Stanley, JPMorgan, and Wells Fargo are riding the crypto wave, with holdings ranging from a few hundred thousand dollars to over $270 million in Morgan Stanley’s case.
Additionally, notable hedge funds like Millennium Management and Schonfeld Strategic Advisors are investing in these ETFs. Millennium recently disclosed it has allocated more than $2 billion to various Bitcoin ETFs, making it the largest holder of these ETFs. Meanwhile, Schonfeld Strategic Advisors has invested $479 million.
Overall, the spot Bitcoin ETFs approved in January have pulled in $11.7 billion, “becoming collectively the most popular ETF launch of all time,” wroge Hougan.
In comparison, the gold ETF launch in 2004, considered the most successful ETF launch in history, gathered $1 billion in its first five days, with 95 professional firms invested in the product at its first 13F filing, Hougan said.