In a bold move indicating a significant shift in investment strategies, institutions representing trillions of dollars in assets are gearing up to dive into spot Bitcoin exchange-traded funds (ETFs) by the close of June, according to insights revealed by Bitwise, a crypto-native asset manager.
Matt Hougan, Chief Investment Officer at Bitwise, outlined in an investment memo sent out on 9th March that the firm is engaged in robust due diligence discussions with large corporations, major wirehouses, and institutional consultants, all of whom are eyeing an increased exposure to Bitcoin in the imminent future. Hougan emphasised that Bitwise had already received confirmation of interest from a diverse spectrum of investors including individual retail investors, family offices, hedge funds, and venture capital firms, all looking to bolster their allocation into spot Bitcoin ETFs. He underlined the significance of this trend, stating, “Just as important as who is buying today is who will be buying tomorrow.”
The notable institutional hunger for Bitcoin ETFs has been instrumental in propelling Bitcoin’s price by over 50% since the ETFs’ inception on 11th January, reaching $71,113 at the time of reporting, as per CoinMarketCap data. Hougan predicted that the inflows into the 10 approved spot Bitcoin ETF products, which have already accumulated nearly $9 billion in net inflows, are poised to accelerate further as the year progresses, particularly in the latter half. He remarked:
“These are massive categories representing trillions of dollars in assets. Based on current trends, I’d suspect we’ll see our first significant flows from these three groups in Q2 2024, and I think those flows will accelerate throughout the year as these investors become more comfortable with the new products.”
Meanwhile, BlackRock’s spot Bitcoin ETF has surpassed the holdings of MicroStrategy, a technology firm renowned for its Bitcoin investment strategy. BitMEX Research data indicates that BlackRock’s IBIT now holds a substantial 197,943 BTC, valued at over $13.5 billion as of 8th March. This impressive feat comes amid a surge in institutional demand for cryptocurrencies, which has seen the newly launched Bitcoin ETFs collectively amass assets valued at a staggering $28 billion. The bullish momentum in institutional investment has propelled Bitcoin’s price to surpass the $70,000 milestone for the first time on 8th March.
Reports suggest that over-the-counter (OTC) trading platforms are struggling to meet the escalating demand for Bitcoin, prompting them to turn to public exchanges to fulfil orders. Notably, large-volume traders, including institutional investors, typically rely on OTC desks for their trading needs. While MicroStrategy, not an ETF issuer, has built a substantial portfolio of 193,000 BTC as part of its corporate treasury strategy, it is noteworthy that BlackRock’s Bitcoin ETF has now overtaken its holdings.
Despite being overshadowed by BlackRock in Bitcoin holdings, MicroStrategy remains steadfast in its Bitcoin-centric strategy. The company recently announced plans for a debt offering aimed at raising over $600 million to bolster its Bitcoin reserves. MicroStrategy’s CEO, Michael Saylor, is a vocal advocate for Bitcoin, famously stating, “I’m going to be buying the top forever. Bitcoin is the exit strategy.”
Saylor firmly believes in Bitcoin’s superiority over traditional asset classes such as gold, the S&P 500, and real estate, emphasising that Bitcoin’s technical superiority justifies its position as the ultimate investment choice. Despite the volatility inherent in cryptocurrency markets, Saylor remains resolute in his commitment to Bitcoin, asserting, “There’s just no reason to sell the winner to buy the losers.”
In conclusion, the impending influx of institutional capital into Bitcoin ETFs signals a change in thinking in the investment landscape. As major corporations and wirehouses position themselves to embrace cryptocurrency, Bitcoin’s journey towards mainstream acceptance appears more assured than ever. With institutional demand continuing to soar and established players like BlackRock expanding their footprint in the crypto space, Bitcoin’s trajectory towards becoming a universally recognised asset class seems inexorable.
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