It is now clear that all it took to get institutional Bitcoin adoption started was an easy-to use, risk-minimized product, in the form of exchange-traded funds (ETFs). In January of this year, the SEC approved nine new ETFs That provide exposure to Bitcoin via the spot market. strict improvement Over the futures ETFs, which began trading in 2021. Both the number and size of the institutional allocations into these ETFs in the first trading quarter have exceeded expectations. Blackrock ETF set the record for fastest time to reach $10 billion assets.
This past Wednesday, institutions that have assets over $100,000,000 were required to submit 13F reports to the SEC. These filings reveal a complete picture of who owns Bitcoin ETFs—the results are nothing short of bullish.
Wide-spread adoption of Institutional Adoption
Back in the day, one institutional investor declaring ownership of Bitcoin was a market-moving event. Three years ago, Tesla was the market leader. decision to add bitcoin Their balance sheet pushed bitcoins up by over 13% within a day.
In 2024, things will look very different. By Wednesday, 534 distinct institutions totaling over $1 Billion in assets had chosen to start allocating bitcoin in Q1 this year. The adoption of bitcoin is staggering, ranging from pension funds and insurance companies to hedge funds.
Over half of the top 25 US hedge funds have now exposure to bitcoin. The largest position is a $ 2 billion one from Millennium Management. In addition, 11 out of 25 largest Registered Investment Advisors are currently allocated.
Why are Bitcoin ETFs attractive to institutional investors who could have bought Bitcoin?
Slow moving large institutions are the slowest of creatures. financial System steeped with tradition, regulation, and risk management. It can take months and even years for a pension plan to update their investment portfolio. This involves committee meetings, thorough due diligence, board approvals, which are repeated many times.
For a person to gain exposure by buying and holding bitcoin, they must first conduct a thorough vetting with multiple providers of trading services (e.g. Galaxy Digital), custodians (e.g. Coinbase) and forensics service providers (e.g. Chainalysis, in addition to creating new processes for risk management, accounting, etc.
Comparatively, it is simple to gain exposure by buying an ETF through Blackrock. Lyn Aden stated it in a recent TFTC podcast, “All the ETF is, is in developer terms, it’s basically an API for the fiat system. It just allows the fiat system to plug into Bitcoin a little bit better than it used to.”
It isn’t true that ETFs provide the best way to get exposure to Bitcoin. In addition to the management fees that come with owning an ETF, there are many tradeoffs that come with such a product that may compromise the core value provided by Bitcoin in the first place—incorruptible money. Although these tradeoffs fall outside of the scope this articleThe flowchart shows some of the factors that are at play.
Why isn’t Bitcoin up more in this quarter?
The fact that bitcoin has only risen 50% this year may be surprising, considering the rate at which ETFs are being adopted. How much more upside is there if the 48% top hedge fund are already allocated?
Although the ETFs enjoy broad ownership, average institutional allocations to the ETFs is still low. own These are very modest. Weighted average of hedge funds (over $1b), RIAs, pensions, etc. that made an investment is below 0.20%. Millennium’s allocation of $2 billion represented less than 1 percent of the 13F reported holdings.
The first quarter of 2024, therefore, will be remembered as the time when institutions ‘got off of zero’. When will they stop dipping their feet in the water and start swimming? Time will tell.
Sam Baker is the guest blogger for River. Opinions are solely theirs own These views do not reflect the opinions of BTC Inc.
“This article is not financial advice.”
“Always do your own research before making any type of investment.”
“ItsDailyCrypto is not responsible for any activities you perform outside ItsDailyCrypto.”
Source: bitcoinmagazine.com