You don’t have to have your eyes on the markets recently to notice that Bitcoin ETFs have been dominating the headlines again this week, in every area except the focus of retail investors.
In a recent chat on X, Bitwise CTO Matt Hogan challenged the popular belief that financial instruments are the result of retail hysteria. He said that institutional interest in such instruments is sweeping the markets and hitting record highs.
Bitcoin ETFs Exchange-traded funds (ETFs) have made nearly $18 billion since the start of the year. That’s impressive considering the Nasdaq 100 QQQs raised $5 billion in their first year. The ETFs are on track to surpass one of the best ETFs of all time.
1/ Bitcoin ETFs are being adopted by institutional investors faster than any other fund in history. Don’t believe the “it’s just a fractionalization” narrative, the data proves otherwise.
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— Matt Hogan (@Matt_Hougan) August 21, 2024
Retail vs. Enterprise: The Numbers Game
But critics aren’t entirely convinced by the hype. They argue that bitcoin ETFs are still largely driven by retail investors. As of Q2 2024, only about 20% of assets under management in bitcoin ETFs were held by institutional investors through quarterly disclosures known as 13Fs. The remaining 80% is held by retail investors, a flaw that has led some to question how institutional these funds really are.
Bitcoin is now trading at $64,128. Chart: TradingView
Institutional Adoption: A Step Forward
According to regulatory filings reported by Reuters, Goldman Sachs and Morgan Stanley Goldman Sachs had a big Q2 2024 with a major investment in Bitcoin exchange-traded funds. Goldman has raised about $418 million in Bitcoin ETFs, most notably $238 million in the iShares Bitcoin Trust. With nearly 7 million shares as of June 30, that puts Goldman near the top of institutional investors in the space.
Morgan Stanley was close behind, investing $188 million in BlackRock’s iShares Bitcoin ETF. These investments, along with its stakes in the Ark 21Shares Bitcoin ETF and the Grayscale Bitcoin Trust, underscore the growing institutional interest in Bitcoin ETFs, which has perhaps been overshadowed by the massive inflows from retail investors.
Bitcoin: A Unique Position in the Market
Such a narrative that Bitcoin ETFs are entirely retail-driven doesn’t capture the bigger picture. While retail capital is pouring into these products, that doesn’t mean that institutions aren’t heavily involved. In fact, the strong retail interest is arguably tipping the balance, making institutional adoption seem less impactful than it actually is.
Hogan’s analysis suggests that despite the dominance of retail investors, Bitcoin ETFs are seeing rapid institutional adoption. Not only is the growth trajectory of these funds, it actually represents broader acceptance of Bitcoin within institutional circles—a fact that is all the more impressive given the kind of skepticism traditional finance has shown toward cryptocurrencies.
Featured image by Pexels, chart by TradingView