Bitcoin ETFs thrive with institutional exposure at 20%

CryptoQuant founder Ki Young Ju has disclosed that institutional investors own only 20% of all spot Bitcoin exchange-traded funds (ETFs). The data, based on the firms’ form 13F filings, shows that they hold just over 193,000 BTC of the total 961,645 BTC held by all the spot Bitcoin ETFs as of October 18.

According to the data, Ark Invest ARKB has the highest percentage of institutional holders, 32.79%, followed by WisdomTree BTCW, 24.55%. However, the two largest ETFs in net flow, BlackRock IBIT and Fidelity FBTC, have 18.38% and 24.14% of their shares held by institutional investors, respectively.

Bitcoin Institutional Holdings (Source: Ki Young Ju/X)

The disclosure shows that retail investors are responsible for most of the inflows into the Bitcoin ETFs, even as institutional investors increase their interest and exposure. Macro investment researcher Jim Bianco noted this in a recent Permissionless Debate with Bloomberg ETF analyst James Seyffart, noting that most of the inflows into the Bitcoin ETFs mostly come from on-chain holders.

According to him, around $13 billion to $14 billion of the overall flow into Bitcoin ETFs has come from on-chain holders. He added that while there might be some institutional interest, it is still relatively low and, in some cases, might even be some time because not all institutional investors are positioned to invest in Bitcoin. For this, he used the State of Wisconsin pension fund as an example, saying:

“The state of Wisconsin is one of the probably better managed public pension funds in the country, meaning that it is fully funded, most are not. and if you are running a properly funded pension fund, you can do things like look at Bitcoin exposure.”

However, he noted that most pension funds are underfunded, poorly managed, and plagued with corruption, making it highly unlikely that they will invest in Bitcoin ETFs anytime soon, even if the managers see the asset’s potential.

Bitcoin ETFs have been a smashing success – Seyffart

Despite the relatively limited exposure to Bitcoin ETFs from institutional investors, Seyfarrt believes the Bitcoin ETFs have been a massive success. During the Permissionless debate, he noted that the Bitcoin ETFs have been the most successful ETFs ever based on their performance.

While he acknowledged the low institutional exposure compared to retail investors, he believes this is still great for Bitcoin ETFs. He noted that the biggest Gold ETF only has 40% institutional holdings based on the form 13F filings. Thus, the 20% for Bitcoin after 10 months is a very good sign.

Seyfarrt also observed that financial advisors are responsible for over $2 billion of the inflows into Bitcoin ETFs, with around $1.5 billion going to IBIT alone. He described this as a very good sign, making the ETFs the most successful over the last 2 years.

Meanwhile, the analyst also believes that the level of inflow into Bitcoin ETFs is a good sign for the asset class because the large volume will attract bigger institutional investors. Thus, it does not matter whether the current institutional investors are buying the ETFs for basis trade, arbitrage, or because they believe in Bitcoin.

BlackRock IBIT is now in the top three best-performing ETFs in 2024

While the debate continues over the institutional adoption of Bitcoin ETFs and whether it is based on belief in Bitcoin potential, the performance of the Bitcoin ETFs, particularly BlackRock IBIT, shows that investor interest is not fading. After pulling in over $1 billion in net flow last week, IBIT now has a year-to-date flow of over $22 billion.

This put it in the top three ETFs overall in YTD flows, an impressive feat given that it has only been around for 10 months. It is now the only ETF in the top 5 by YTD flows that have been around for the shortest period, with all the others being over 20 years old and with more than $300 billion in assets under management.

With the success of Bitcoin ETFs, asset managers are now preparing for a time when the Securities Exchange Commission can approve ETFs for other cryptocurrencies. Presently, there are pending applications for Solana, Litecoin, and Ripple XRP ETFs. However, industry experts believe that a victory for Kamala Harris ends the hope of any other ETF approval for crypto assets.

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