What does it mean when companies recently purchase billions of dollars in Bitcoin?
Matt Hougan, CIO of Bitwise, a spot Bitcoin ETF issuer, said that the Bitcoin ETF allocation included in the recent 13F filing is just the beginning. According to the CIO, institutional investors’ Bitcoin allocations in their recently released Q1 13F filings were merely a “down payment.”
Hougan explains that most professional investors take six to 12 months to evaluate a cryptocurrency investment. This process typically follows the pattern of due diligence, individual allocation, individual customer allocation, and finally platform-wide allocation.
“Approximately six months after initial deployment, many companies begin to deploy across their entire customer books with allocations ranging from 1 to 5 percent of the portfolio,” Hougan wrote in a note to clients Tuesday.
Bitwise CIO highlighted the potential of Bitcoin ETFs, saying, “The biggest promise of Bitcoin ETFs is that they open the door for professional investors to purchase BTC in large quantities, significantly increasing the pool of capital invested in the asset.” .
A 13F filing is a quarterly report filed with the SEC by institutional investment managers with more than $100 million in equity assets under management. These filings provide the manager’s stock holdings at the end of each quarter.
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Hougan highlighted several companies that have significant holdings in Bitcoin ETFs. Hightower Advisors, the second-largest registered investment advisory firm, owns $68 million worth of physical Bitcoin ETFs. Other notable companies include Cambridge Investment Research, Sequoia Financial Advisors, Integrated Advisors, and Brown Advisory, with stock valuations of $40 million, $12 million, $11 million, and $4 million, respectively.
As of last Thursday, it was reported that a total of 563 professional investment firms held $3.5 billion worth of Bitcoin ETFs. Hougan expects more than 700 specialty firms to report total assets under management approaching $5 billion by the filing deadline of today, May 15. The new ETF’s ownership size is “unorthodox,” according to Hougan.
While individual investors still dominate the ETF market, professional investors account for only 7-10% of the $50 billion in ETF assets currently under management. However, Hougan argues that this percentage will increase significantly given the adoption patterns of institutional investors.
For example, Hightower Advisors’ current spot Bitcoin ETF holdings are just 0.05% of assets, according to the CIO. If you follow the typical behavior pattern Hougan describes, a 1% allocation over time would equate to $1.2 billion for a single company.
*This content is not investment advice.
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