Bitwise: 2024Q2 13F filings are encouraging, institutions continue to buy BTC

Author: Matt Hougan, Chief Investment Officer of Bitwise; Compiler: 0xjs@黄金财经

The biggest question in the cryptocurrency space right now is whether institutions and professional investors will allocate cryptocurrencies on a large scale.

This question is more important than the results of the presidential election, the prospects for congressional legislation, and the development of technology in the blockchain field.

The reason is simple: mathematics.

Most investable assets are primarily held by professionals. For example, studies show that institutions control about 80% of the U.S. stock market. In contrast, institutions hold relatively few cryptocurrencies. The most aggressive estimates I've seen suggest that they may own 10% of all Bitcoin.

In order for this number to reach 50% of the market share, professional investors would need to buy about $500 billion of Bitcoin. Needless to say, this will have a huge impact on the price.

So... will they buy it?

Thanks to the advent of Bitcoin ETFs, and the SEC’s requirement that institutions disclose their ETF holdings on a quarterly basis using Form 13F, we can now answer that question. The latest batch of 13F filings, covering Q2 2024, hit the market last week, and what they reveal is interesting.

Here are three key takeaways.

Key Finding 1: Yes, Institutions Continue to Buy Bitcoin ETFs

The first finding is also the most important: Institutions Continue to Buy Bitcoin ETFs in Q2.

That’s not a guarantee. The price of Bitcoin fell 12% in Q2 2024, and many wondered if that would scare off institutional investors. The answer is a resounding “no.”

The total number of institutional investors holding Bitcoin ETFs grew 14% quarter-over-quarter, from 965 to 1,100. Their share of total assets under management (AUM) in Bitcoin ETFs also grew from 18.74% to 21.15%. Overall, institutional investors held a total of $11 billion in Bitcoin ETFs at the end of the quarter.

There were some healthy flows among these flows. In Q2, 112 investors who held Bitcoin ETFs at the end of Q1 sold the asset, while 247 new firms made their first investments. Overall, Bitcoin ETFs added 135 new firms.

In my opinion, this is a very good sign. If institutions buy Bitcoin when the price fluctuates, imagine what will happen in a bull market.

Key Finding #2: The pace of institutional adoption is historic

Critics like to point out that Bitcoin ETFs are primarily owned by retail investors, who hold about 79% of Bitcoin ETF AUM. They use this fact to suggest weak institutional demand.

This is simply wrong. The pace of institutional adoption of Bitcoin ETFs is the fastest in history.

Using a list from Eric Balchunas at Bloomberg, I looked at institutional ownership of the 10 fastest-growing new ETFs of all time, ranked by AUM one month after listing. Specifically, I looked at the number of institutional holders and total institutional AUM of these ETFs two quarters after listing to compare to the current state of Bitcoin ETF ownership.

Fastest Growing Non-Bitcoin ETFs: Institutional Adoption Two Quarters After Listing

Source: Bitwise Asset Management, data from WhaleWisdom and Eric Balchunas. Data as of June 30, 2024.

(1) Non-Bitcoin ETFs are ranked based on AUM one month after listing.

(2) Note: QQQ was launched in March 1999. 13-F data for the fund was not available until the first quarter of 2021, so these numbers reflect ownership nine quarters after listing.

Not comparable at all. The only comparable ETF is Invesco’s QQQ, but that’s just an apples-to-oranges comparison. QQQ launched in March 1999, but I can’t find any historical 13F data for the fund until Q1 2001. In other words, the numbers in the QQQ chart represent institutional adoption of the fund nine quarters into its growth. Even so, the Bitcoin ETF had 3 times as many buyers!

Some might argue that it’s unfair to compare Bitcoin ETFs overall to individual ETFs. But even if you look at just individual Bitcoin ETFs, they dominate the charts. For example, Bitwise’s Bitcoin ETF (ranked fourth among Bitcoin ETFs by AUM at the end of Q2) has more institutional holders (139) at this stage of its existence than SPDR giant GLD (118).

ETFs are a unique investment product that can be owned by both institutional and retail investors. We shouldn’t let the historic adoption of Bitcoin ETFs by retail investors obscure the fact that Bitcoin ETFs have also gained institutional investor traction faster than any other ETF in history.

Key Finding #3: Most Institutions Are Still Just Getting Started

And here’s the fact that the filings show that the median investor who reported holdings in Bitcoin ETFs in the second quarter had just 0.47% of their portfolio invested in Bitcoin.

I find this number very encouraging. After more than 6 years of managing cryptocurrency risk for professional investors, one trend we’ve noticed at Bitwise is that they tend to build their positions over time. Many start with 1% of their portfolio or less, but over time that number often rises to 2.5% or even 5%.

I expect the average institutional investor holding to exceed 1% within a year and continue to rise from there.

Conclusion: ETFs are a multi-year narrative

All in all, I find the 13F filings for the second quarter of 2024 very encouraging. Institutions continued to buy Bitcoin ETFs in the second quarter despite the price drop. Hundreds of new institutional investors made their first purchases. And, the Bitcoin ETF was adopted by institutions faster than any ETF in history.

As the former CEO of ETF.com, I have witnessed the launch of ETFs for two decades. One thing I know is that most ETFs are built over time: the first year can be a challenge, but momentum tends to build in years two, three, four, and five. I expect the same thing to happen here. After all, major platforms are only now opening up access to Bitcoin ETFs (Morgan Stanley approved them earlier this month). I expect Bitcoin ETF inflows to be larger in 2025 than in 2024, and larger in 2026 than in 2025. Institutions are emerging, and getting bigger.