Institutional investors are increasingly embracing Bitcoin, with their stake in the cryptocurrency now reaching 10% of the total supply, according to Matt Hougan, Chief Investment Officer at Bitwise Asset Management.
This trend is expected to continue as professional investors continue to increase their interest in Bitcoin, especially through ETFs.
In a recent analysis of Q2 13F filings, which are quarterly financial disclosures required by the U.S. Securities and Exchange Commission (SEC), Hougan highlighted the growing interest in Bitcoin ETFs among institutional investors. He noted that the number of institutional investors holding Bitcoin ETFs increased by 14% in Q2 2024, from 965 in the first quarter to 1,100 as of the end of June. This growth is particularly significant considering that 112 investors sold their Bitcoin ETF holdings during the same period, meaning 247 new firms gained exposure to Bitcoin through these products.
“One thing I know is that most ETFs improve over time,” Hougan wrote in a note. “The first year may be tough, but momentum tends to build in years two, three, four and five. I expect the same thing to happen here.”
Hougan noted that while about 80% of the U.S. stock market is held by institutional investors, those same investors currently hold only 10% of all Bitcoin. To get that figure to 50%, professional investors would need to buy an additional $500 billion worth of Bitcoin, according to Hougan’s calculations.
Institutional investors are already making significant strides in this direction. In the second quarter, Bitcoin ETFs held 21.15% of total assets under management, compared to 18.74% in the first quarter. This means that as of the end of June, approximately $11 billion worth of Bitcoin was held through ETFs.
“That’s a great sign,” Hougan said. “If institutions are buying Bitcoin when prices are volatile, imagine what could happen in a bull market.”
Despite a 12% drop in Bitcoin’s price in Q2, the cryptocurrency has gained over 41% since the start of 2024. Hougan emphasized that the rate of institutional adoption of Bitcoin ETFs is unprecedented, outpacing some of the most popular ETFs in history. For example, the Invesco QQQ ETF, SPDR Gold Shares ETF, and JPMorgan BetaBuilders Japan ETF have all gained significantly fewer institutional holders over a comparable time period.
The 13F filings also revealed that the median institutional investor currently allocates just 0.47% of their portfolio to Bitcoin, a figure that Hougan found “extremely encouraging.” He noted that many professional investors start with a small allocation, typically 1% or less, but gradually increase it to 2.5% or even 5% over time.
*This is not investment advice.
