The Bitcoin ETF has been incredibly successful, attracting $11.7 billion in funds since its launch on January 11th, making it the most popular ETF ever. Now, everyone wants to know: who is behind the buying? Specifically, people are curious about whether it is professional or retail investors driving the flow of funds. This is an important question because the potential of the Bitcoin ETF lies in its ability to open the door for professional investors to buy Bitcoin in large quantities, thus significantly increasing the pool of funds invested in Bitcoin.
If it is professional investors buying, that’s great. But if it’s all retail investors, then it’s not as encouraging. Why? Because the scale behind it is completely different. In the months following the launch of the ETF, this question remained unanswered. Investors purchased the ETF through brokerage accounts, which meant that fund companies like Bitwise did not know who was buying their funds. However, once a quarter, the U.S. Securities and Exchange Commission requires investors with assets over $100 million to report their holdings of publicly traded securities in a so-called “13F” filing.
Technically, these filings are supposed to be submitted within 45 days after the end of the quarter, which means investors had until May 15th to submit their reports. But thousands have already submitted, so we now have a preliminary understanding of the owners of these ETFs. The data is very interesting, and here are the three most important points:
Point 1: Many professional firms own Bitcoin ETFs
To compile this memo, I analyzed the 13F filings of the 11 publicly traded Bitcoin ETFs as of May 9th. The significant finding is that many professional investors own Bitcoin ETFs. This includes some well-known asset management companies such as:
Hightower Advisors: According to Barron’s, this company is the second-largest RIA firm in the U.S., managing $122 billion in assets. They own $68 million worth of Bitcoin ETFs.
Bracebridge Capital: A hedge fund based in Boston that manages funds for institutions like Yale University and Princeton University. They hold $434 million worth of Bitcoin ETFs.
Cambridge Investment Research: A company with over 40 years of history that manages over $170 billion in assets. They own $40 million worth of Bitcoin ETFs.
Sequoia Financial Advisors: Based in Towson, Maryland, with a market value of $17 billion. They own $12 million worth of Bitcoin ETFs.
Integrated Advisors: A company based in Dallas with over 12,000 clients and $4 billion in assets under management. They own $11 million worth of Bitcoin ETFs.
Brown Advisory: A San Francisco-based company with assets worth $96 billion. They own $4 million worth of Bitcoin ETFs.
As of last Thursday, a total of 563 professional investment firms reported holding $3.5 billion worth of Bitcoin ETFs. By the May 15th filing deadline, I estimate that we may have over 700 professional firms with total assets under management approaching $5 billion. This is definitely significant. For anyone wondering if they are the only financial advisor, family office, or institution considering Bitcoin investments, the answer is clear: you are not alone.
Point 2: Historical scale of holdings by professional investors
For a new ETF, this level of holdings is unprecedented. Most ETFs have very few 13F filers in the first few months of their listing. Bloomberg ETF analyst Eric Balchunas says the number of large investors in the Bitcoin ETF is surprising. The closest comparison I can find in the historical records is the launch of the gold ETF at the end of 2004. At the time, the launch of the gold ETF was considered the most successful ETF ever, raising over $1 billion in just five days. However, when it filed its first 13F, the gold ETF only had 95 professional firms invested. In terms of breadth of ownership, the Bitcoin ETF has achieved historic success.
Point 3: Retail investors hold the majority of circulating shares of Bitcoin ETFs
While I think $30-50 billion and 563-700 firms is a huge success, it’s important to remember that the Bitcoin ETF manages assets of $50 billion. Therefore, as a percentage of total investments, professional investors only own 7-10%. I suspect the media will latch onto this number, suggesting that these ETFs are “retail-driven” funds. To some extent, they are right: retail investors have indeed poured a significant amount of money into Bitcoin ETFs, which is a good thing. It means they are able to access these investments on the same terms as the world’s largest institutions. But I believe this narrative overlooks a key pattern we have seen in institutions when it comes to cryptocurrency allocations.
Let me explain why these 13F filings make me unusually optimistic. Bitwise has been helping professional investors access cryptocurrencies for over seven years. Today, we serve thousands of companies, including RIAs, brokers, family offices, and institutions. One thing I have learned from seven years of practice is that most investors follow a familiar pattern:
Step 1: Due diligence. Most professional investors take 6-12 months to evaluate cryptocurrencies. It is rare for clients to allocate funds into the space immediately after their first meeting.
Step 2: Personal allocation. We often see professionals make a small personal allocation before allocating on behalf of clients. They want to test the waters before pushing investors into the market.
Step 3: Independent client allocations. Next, these professionals typically allocate on behalf of a small number of clients, often those who proactively ask about cryptocurrencies.
Step 4: Platform-wide allocations. Around six months after the initial allocations, many firms start allocating across their entire client base, ranging from 1% to 5% of portfolios.
Not all advisors follow this pattern, but it is what we commonly see. This tells us that the Bitcoin ETF allocations shown in the recent 13F filings are just the initial foray. For example, Hightower Advisors may allocate $68 million to Bitcoin ETFs today, which is great, but it’s only 0.05% of their assets. If they follow the above pattern, this allocation will increase over time. Specifically, allocating 1% of their portfolio to Bitcoin would be equivalent to $1.2 billion, and that’s just from one firm. When you consider the growing number of professional investors participating in this space, you can understand why I am so excited.
Original Article: Matt Hougan, Bitwise Chief Investment Officer
Translation: Luffy, Foresight News
