Bitwise: Institutions Buck Trend with Increased Positions as Bitcoin ETFs Rapidly Expand
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Bitwise: Institutions Buck Trend with Increased Positions as Bitcoin ETFs Rapidly Expand
Bitcoin ETFs have seen faster institutional adoption than any other ETF in history.
Navigating Web3 tides with focused insightsBy Matt Hougan, Chief Investment Officer at Bitwise
Translated by Luffy, Foresight News
The most critical question in crypto today is: Will institutions and professional investors allocate to crypto at scale? This question matters more than presidential elections, congressional crypto legislation, or blockchain technology developments.
Why? The data tells the story. Most investment assets in the world today are held by professionals. Research shows that institutions control about 80% of U.S. securities markets. In contrast, institutional ownership of crypto remains minimal. The most aggressive estimate I’ve seen suggests institutions may own just 10% of Bitcoin’s total supply.
Imagine if institutions were to hold 50% of the market—how much Bitcoin would they need to buy? Roughly $500 billion. There’s no doubt this would have a massive impact on Bitcoin’s price.
So the real question is: Will they buy?
Since the launch of Bitcoin ETFs, the U.S. Securities and Exchange Commission (SEC) has required institutions to disclose their ETF holdings quarterly using Form 13F. Thanks to these disclosures, we can now answer that question. The latest batch of 13F filings, covering Q2 2024, was released last week—and reveals some fascinating insights. Here are my three key takeaways:
Discovery 1: Institutions Are Continuously Buying Bitcoin ETFs
This is the most important finding: Institutions continued buying Bitcoin ETFs in Q2.
Bitcoin’s price fell 12% during the second quarter of 2024. Many wondered whether institutional investors would be scared off. The answer is no.
The total number of institutional investors holding Bitcoin ETFs rose 14% quarter-over-quarter, increasing from 965 to 1,100. Their share of assets under management (AUM) in Bitcoin ETFs also increased—from 18.74% to 21.15% (with retail holding 79%). Overall, institutions held $11 billion in Bitcoin ETFs by the end of the quarter.
The flow dynamics look healthy. During Q2, 112 investors who held Bitcoin ETFs in Q1 chose to sell, while 247 new firms made their first-ever investments. Ultimately, Bitcoin ETFs added 135 net new institutional investors.
To me, this is a strong signal. If institutions are buying through volatility, it’s hard to imagine what could happen in a bull market.
Discovery 2: Institutional Adoption of Bitcoin ETFs Is Unprecedentedly Fast
Critics often claim that Bitcoin ETFs are primarily held by retail investors, who own about 79% of Bitcoin ETF AUM, suggesting weak institutional demand.
This is completely wrong. Bitcoin ETFs are being adopted by institutions faster than any ETF in history.
I analyzed institutional ownership in the 10 fastest-growing new ETFs of all time—ranked by AUM one month after launch—based on a list compiled by Bloomberg’s Eric Balchunas. Specifically, I compared how many institutions held these ETFs and their total institutional AUM two quarters after launch, against current Bitcoin ETF ownership data.
Institutional adoption of the fastest-growing non-Bitcoin ETFs two quarters after launch; data from WhaleWisdom and Eric Balchunas; data as of June 30, 2024.
The gap between these ETFs and Bitcoin ETFs is enormous. The closest comparison is Invesco’s QQQ, launched in March 1999—but I couldn’t find any historical 13F data for that fund until Q1 2001. In other words, the QQQ figure represents institutional adoption nine quarters after launch. Even then, Bitcoin ETFs have triple the number of institutional buyers.
Some might argue that comparing the entire category of Bitcoin ETFs to individual ETFs isn't fair. But even when looking at individual Bitcoin ETFs, they still top the charts. For example, Bitwise’s Bitcoin ETF—the fourth-largest by AUM at the end of Q2—has more institutional holders (139) than SPDR’s giant GLD (118).
ETFs are unique products accessible to both institutional and retail investors. We must not let retail’s historic embrace of Bitcoin ETFs obscure another truth: Bitcoin ETFs are also more favored by institutions than any other ETF in history.
Discovery 3: Most Institutions Are Still Dipping Their Toes
One more crucial point: The filings show that the median investor holding Bitcoin ETFs in Q2 allocated only 0.47% of their portfolio to Bitcoin.
This is encouraging. After managing crypto risk for professional investors for six years, we’ve observed a clear pattern: institutions tend to build positions gradually over time. Many start with 1% or less of their portfolio, but eventually increase to 2.5%, or even 5%.
I expect institutional allocations to Bitcoin ETFs will surpass 1% within a year—and continue rising thereafter.
Conclusion: Institutional Bitcoin ETF Holdings Will Grow Year After Year
In summary, I find the Q2 2024 13F filings highly encouraging. Despite falling Bitcoin prices, institutions kept buying Bitcoin ETFs. Hundreds of new institutional investors made their first purchases. And the pace of institutional adoption exceeds that of any ETF in history.
As former CEO of ETF.com, I’ve witnessed the launch of countless ETFs over two decades. From experience, most ETF positions are built over time: the first year may be exploratory, but momentum typically builds in years two, three, four, and five. The same will happen with Bitcoin ETFs. After all, major institutions are only now beginning to open access—Morgan Stanley approved them just earlier this month. I expect 2025 flows into Bitcoin ETFs to exceed 2024, and 2026 to exceed 2025. Institutions are coming—and they’re getting bigger.
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