U.S. spot bitcoin ETFs have generated net inflows of $12 billion.
The Bitcoin (BTC) spot ETFs in the United States generated high expectations before their launch and, undoubtedly, have exceeded the projections of both local and foreign investors due to their performance four months after becoming operational. A clear sign of the importance of digital currency through exchange-traded funds is that public and state agencies, private companies, and even large banking institutions that criticized Bitcoin now have exposure to this asset.
ETFs allow investors to gain exposure to the price of bitcoin without having to interact directly with it, meaning those who purchase the ETF are not buying and managing the crypto asset directly. So far, bitcoin-based exchange-traded funds have generated $12B in net inflows driven by the presence of institutional investors. Companies’ preference for ETFs is evident in Form 13Fs, quarterly portfolio reports that companies file with the U.S. Securities and Exchange Commission (SEC).
The top 10 investors in bitcoin ETFs
The following image shows the biggest investors who entered the Bitcoin ETF market. It is made based on Form 13F data by Julian Fahrer, founder of the Heyapollo platform and a specialist in institutional cryptocurrency investments.
Millennium Management
First up is Millennium Management, a New York-based investment management firm that invested $2 billion in ETFs, equivalent to 30,185 BTC. Millennium Management accessed four of the eleven publicly traded ETFs, according to its Form 13F. It made the largest equity purchase from the BlackRock-managed iShares Bitcoin Trust (IBIT), worth $786 million. Afterward, they invested $752 million investment in the Fidelity-managed Fidelity Wise Origin Bitcoin Fund (FBTC); $188 million in the Grayscale-issued ETF, Grayscale Bitcoin Trust (GBTC); $41.8 million in the ARK Invest-issued fund; ARK 21Shares Bitcoin ETF (ARKB); and $41.5 million in the company’s Bitwise fund, Bitwise Bitcoin ETF (BITB).
Eric Balchunas of Bloomberg Intelligence commented that more than 500 companies opted to invest in the funds. According to his estimates, this is 200 times the average number of investors a new ETF usually generates, which shows how well-received these financial instruments have been.
Susquehanna International Group
In second place is Susquehanna International Group. This Pennsylvania-based global trading and technology firm invested $1.1 billion in many Bitcoin ETFs, equivalent to 16,601 BTC. Most of the holdings are in the GBTC fund at $1 billion. The remainder splits among eight funds, highlighted by Valkyrie Bitcoin Fund (BRRR); Invesco Galaxy Bitcoin ETF (BTCO); Franklin Bitcoin ETF (EZBC); VanEck Bitcoin Trust (HODL), as well as ARKB, BITB, IBIT, and FBTC.
Horizon Kinetics
In the third position stands Horizon Kinetics, a New York-based investment manager. This company has holdings in ETFs reaching $988 million, equivalent to 14,908 BTC. Investments are split between GBTC and IBIT with $961 million and $27 million, respectively.
Bracebridge Capital
Fourth place goes to Bracebridge Capital, a Boston-based hedge fund whose investment in bitcoin exchange-traded funds amounts to $404 million, equivalent to 6,097 BTC. This company invested in three ETFs: ARKB received $285 million, IBIT $93 million, and GBTC $24 million.
Boothbay Fund Management
In fifth place is Boothbay Fund Management, a company located in New York and offering wealth management and advisory services. Its ETF holdings total $303 million, equivalent to 4,573 BTC. They allocated $139 million to IBIT, $64 million to GBTC, $50 million to FBTC, and $48 million to BITB.
Morgan Stanley
Sixth place goes to what is probably the most recognized company on the list: Morgan Stanley. It is an American bank managing 1.2 trillion dollars in assets under management. Their headquarters are in New York. MS acquired $251 million in GBTC shares, equivalent to 3,788 BTC. It is striking that several banks are investing in bitcoin ETFs, considering they declared against the digital currency years ago.
Ark Investment Management
Ark Investment Management, a Florida-based company, holds the seventh position. They have $192 million in shares of its bitcoin fund ARKB, equivalent to 2,897 BTC. Cathie Wood, founder and CEO of the company, is one of the drivers of Bitcoin in the market and expects that by 2030, Bitcoin price will be above 1 million dollars.
Aristeia Capital
Eighth place went to Aristeia Capital, an investment management firm headquartered in Connecticut. It only bought shares of the IBIT fund in the order of 152 million dollars, equivalent to 2,294 BTC.
State of Wisconsin
The ninth position is striking. The State of Wisconsin invested $151 million in two ETFs, equivalent to 2,278 BTC. The share purchase splits into $92 million to IBIT and $59 million to GBTC. They acquired The State of Wisconsin Investment Board (SWIB).
HBK Investments
The last top 10 place goes to HBK Investments. They are a Texas-based alternative investment manager. The company bought shares of 4 ETFs for up to $105 million, equivalent to 1,584 BTC.
Digital gold takes the market by storm
Vetle Lunde, an analyst at K33 Research, compared the number of investors between bitcoin ETFs and gold ETFs in their first quarter.
According to the 13F forms, 937 companies invested in bitcoin ETFs, while gold-based ETFs garnered investment from only 95 companies. These numbers are interesting as long as Bitcoin is considered by many to be a kind of digital gold. As can be seen, this “digital gold” is achieving much faster adoption in the stock market than physical gold ETFs, launched in 2004. There could be many reasons for gold preference, such as the prospect of higher long-term returns, portfolio diversification, or the perception of bitcoin as a better store of value than gold.
For his part, Matt Hougan, chief investment officer at Bitwise, commented that the launch of bitcoin ETFs has been the “most popular ever.” In his view, “the big news” is that many professional investors now own bitcoin ETF shares. He stresses that the allocations in recent 13F filings are just a “down payment” and that allocation will increase over time.
“To put it in context, a 1% portfolio allocation to bitcoin would equate to $1.2 billion, all from a single company. Multiply that by the growing number of professional investors participating in the space. You can begin to see what’s behind my enthusiasm.“
Matt Hougan, chief investment officer, Bitwise.
BlackRock: favorite bitcoin ETF
The bitcoin ETF that had the best investor acceptance, seen in the data above, was BlackRock’s IBIT. It finished with 414 institutional holders reported in the first quarter. Mutual fund specialist Eric Balchunas finds this “mind-boggling” and notes that having 20 institutional holders when it is such a young financial product is “very rare.”
The preference for the IBIT fund is considerably higher than the rest of the ETFs launched in January. Still, while investors’ reception regarding ETFs such as FBTC, BITB, and ARKB is lower, they are well ahead of ETFs based on other asset classes. IBIT’s strong performance is unsurprising since BlackRock is the world’s largest asset management firm. BlackRock has $10.5 trillion in assets under management, almost $1.4 trillion more than in March 2023.
The strength of a company of that level has led to its bitcoin ETF since its launch to have 71 days with green numbers, which led it to be part of the select “club” of the 10 ETFs with the most days of positive net capital flows. In addition, at the beginning of March, this ETF joined another select club: that of the few ETFs that manage more than $10 billion. IBIT was the investment fund, not only of Bitcoin but of all history, that reached such a figure the fastest.
What impact will this institutional adoption have on Bitcoin?
If this trend continues, it will be bullish for the price of Bitcoin due to the operation of spot ETFs backed by the underlying asset. Unlike futures ETFs, which are based on futures contracts and do not require the direct purchase of bitcoin, spot ETF management firms must purchase and hold bitcoin in their treasuries to back their shares. This process of acquiring bitcoin to back spot ETFs creates a direct and tangible demand in the market. As more investors put money into these funds, the entities managing the ETFs must acquire more bitcoin to maintain adequate backing. The situation, in turn, reduces the amount of bitcoin available on the open market, which can lead to an increase in price due to limited supply.
In addition, the participation of large banks and corporate investors in these ETFs indicates a growing institutional interest in bitcoin. The influx of institutional capital brings large sums of money to the market and may increase confidence in Bitcoin as a legitimate and valuable asset. This additional legitimacy can attract more institutional and retail investors, creating an upward investment cycle and rising prices.