Hedge funds, pension funds, and banks are increasingly directing capital into exchange-traded funds (ETFs) that invest directly in Bitcoin, signaling a broader acceptance of the asset class among traditional investors. This trend has been propelled by U.S. regulators, who reluctantly pushed these financial products into the mainstream earlier this year.
Notable buyers include hedge funds like Millennium Management, which held shares in at least five Bitcoin ETFs, according to an analysis of second-quarter filings with the U.S. Securities and Exchange Commission (SEC) conducted by Bloomberg. Although Millennium, which manages $68 billion in assets, reduced its stakes in these ETFs compared to the previous quarter, the firm remained the largest shareholder in most of the funds, including BlackRock’s iShares Bitcoin Trust (ticker: IBIT).
Other significant investors reported in the SEC filings include Capula Investment Management, Schonfeld Strategic Advisors, and Steven Cohen’s Point72 Asset Management. Additionally, buyers ranged from the State of Wisconsin Investment Board to global market makers operating across regions from Hong Kong to the Cayman Islands, Canada, and Switzerland.
Following the SEC’s Wednesday deadline for second-quarter 13F reports, data compiled by Bloomberg revealed 701 new funds holding spot-Bitcoin ETFs, bringing the total number of institutional holders to nearly 1,950. Despite multiple inquiries, Millennium, Capula, Schonfeld, SWIB, and Point72 declined to comment on their positions.
The spot-Bitcoin ETFs, which launched in January, have far exceeded expectations in terms of capital inflows and total assets. Collectively, these funds have seen a net inflow of $17 billion this year, with BlackRock’s IBIT alone growing into a $20 billion giant. The availability of such ETFs has made it easier for everyday investors to engage in Bitcoin trading.
This surge in institutional interest is particularly noteworthy given Bitcoin’s lackluster price performance—down nearly 13% in the quarter—and the fact that few financial advisers are authorized to recommend these ETFs to clients, according to Noelle Acheson, author of the Crypto Is Macro Now newsletter.
“This reflects a mix of conviction and investors taking time to ‘do the work,’” Acheson noted. “So far, Morgan Stanley is the only major wirehouse allowing its financial advisers to recommend BTC spot ETF positions. However, other firms are likely to follow, which would not only increase demand but also encourage a longer-term investment perspective.”
In July, spot-Ether ETFs were also approved, drawing $1.9 billion in inflows, excluding $2.3 billion in outflows from the Grayscale Ethereum Trust (ETHE), which transitioned to an ETF last month, according to Bloomberg data.
While the 13F filings offer only a snapshot of institutional investments, they don’t reveal the specific motivations behind these holdings. It’s possible that not all investors are Bitcoin enthusiasts; some may be engaging in trades aimed at profiting from the cryptocurrency’s volatility or offsetting short positions in derivatives. Others may have acquired ETFs as part of a basis trade strategy, which capitalizes on price discrepancies between spot and futures markets, avoiding the complexities of dealing with Bitcoin directly.
Among the hedge funds active in the second quarter was Hunting Hill Global Capital, which reported holdings in IBIT shares. Adam Guren, the firm’s founder and chief investment officer, highlighted that Hunting Hill has been involved in the cryptocurrency space since 2016.
“One of our trading strategies involves providing liquidity within the ETF ecosystem,” Guren explained. “Given the current political tailwinds, we anticipate the introduction of more products in the U.S., including options on Bitcoin ETFs, Solana ETFs, and potentially others. This expansion would create further opportunities for our trading strategies.”
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