Institutional Appetite Grows Toward Bitcoin ETFs Amid Volatility
In Brief
Disclosures through 13F filings reveal notable institutional investors dabbling in Bitcoin ETFs, underscoring a growing acceptance of crypto within the traditional financial landscape.
This year, the U.S. spot Bitcoin ETF market has experienced explosive growth, surpassing a remarkable $200B in trading volume since its inception. Recent disclosures through 13F filings reveal notable institutional investors dabbling in these recently regulated Bitcoin ETFs, albeit with modest allocations. This trend underscores a growing acceptance of cryptocurrencies within the traditional financial landscape, with institutional players cautiously embracing this new asset class. For mainstream institutional purposes, spot Bitcoin ETFs are indispensable, as they enable everyday investors to engage with Bitcoin’s price changes via brokerage accounts. As exchange-traded products, they provide a regulated and easy entry into the digital currency market for mainstream investors.
On May 1, BlackRock’s Bitcoin ETF experienced its first day of net outflows, joining other major players like Fidelity, GBTC, and ARK in significant sell-offs. The total net outflows from all ETFs amounted to $564 million, as shown in the table by Farside Investors below. This marks the largest daily outflow since August 2023.
Despite these volatility-leading outflows, BlackRock highlights an increasing interest in the ETFs from major institutional investors. Notably, BlackRock’s head of digital assets anticipates sovereign wealth funds, pensions, and endowments joining the fray soon. Their positive outlook underscores the prospect of additional major expansion within the BTC ETF market.
The ongoing diligence among interested institutional firms may indicate a pragmatic approach to Bitcoin investment, signaling promising growth prospects for the market. Some consider it an obvious bullish sign.
However, some speculate on potential challenges.
An NFT artist and a crypto influencer, CryptoTea, suggests that countries will print money to acquire Bitcoin, and BlackRock is leveraging this understanding to influence governments. Their argument is straightforward: being the first country to exchange printed currency for Bitcoin can lead to wealth accumulation, while delaying this action may result in difficulty trading paper money for Bitcoin. This strategy highlights the potential benefits of early adoption in the evolving landscape of digital currencies.
Outside the U.S.: BNP Paribas Steps into the Fray
Meanwhile, BNP Paribas has entered the Bitcoin ETF arena, having purchased shares in IBIT. The bank acquired 1,030 IBIT shares in the first quarter of 2024 at $40.47 per share, totaling $41,684.10—an investment falling below the value of a 1BTC at its current price.
This move marks one of the initial instances of a major financial institution investing in a spot BTC ETF, lending credence to the belief that institutional investors are gravitating toward such ETFs.
BNP Paribas has disclosed in a quarterly 3F report to the SEC. These reports are mandatory for institutional investment managers holding over $100M in assets under management. These reports must be submitted to the SEC within 45 days of the end of each quarter, encompassing foreign entities like BNP Paribas if they engage in transactions within the U.S. market, such as purchasing ETFs from American issuers.
Asian Market Keeps Pace
Hong Kong made history on April 30 by introducing six spot bitcoin and ether (ETFs), marking the first instance in Asia where retail investors can engage in trading these cryptocurrencies at spot prices.
Asia’s first spot, bitcoin and ether ETFs, debuted with a lukewarm reception. Despite six ETFs hitting the market, trading was subdued. Still, pre-listing fundraising hinted at strong interest from crypto enthusiasts and traditional investors alike. What’s unique about Hong Kong’s ETFs is the “in-kind” transaction mechanism, allowing investors to trade using crypto tokens. However, management fees are higher compared to the U.S. scene. With more trading platforms approved, costs could go down, making it more competitive.
This launch puts Hong Kong in direct competition with the U.S. for crypto investors.
However, the Hong Kong Bitcoin ETF had a comparatively soft debut. By comparison, bitcoin exchange-traded funds listed in the U.S. witnessed trading of shares valued at $4.6 billion on the first day of trading.
How Can Spot BTC ETFs Influence the Asset’s Price?
Crypto market coach and the founder of Open4Profit, Zia ul Haque, says that the introduction of Bitcoin and Ethereum Spot ETFs carries significant implications for institutional investors who will find secure custody solutions, easing their entry into the BTC and ETH markets. As these ETFs accumulate more assets, the volatility of BTC prices is anticipated to decrease. He further speculates that retail investors may perceive alternative cryptocurrencies as opportunities, potentially driving crypto adoption forward.
The increased liquidity provided by spot BTC ETFs has the potential to result in greater price stability and improved price determination within the bitcoin market. Although a spot bitcoin ETF doesn’t directly impact the price of bitcoin, the heightened demand and acquisition of bitcoin by these ETFs might gradually elevate its price.
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About The Author
Zhauhazyn is a copywriter and sociology major. Fascinated by the intricate dynamics of Science and Technology Studies, she delves deep into the realm of Web3 with a fervent passion for blockchain.
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Zhauhazyn is a copywriter and sociology major. Fascinated by the intricate dynamics of Science and Technology Studies, she delves deep into the realm of Web3 with a fervent passion for blockchain.
