Riding the Crypto Wave: Why Asset Managers Are Betting Big on Bitcoin
The fund managers buying Bitcoin ETFs
After Donald Trump secured victory at the ballot box in November 2024, the world of Bitcoin entered a phase of frenzy, as crypto investors anticipated that the self-styled ‘crypto president’ would deliver against campaign promises favoring the industry. The price of Bitcoin and other cryptocurrencies pumped accordingly, and holders rejoiced as the value of their holdings climbed.
While the excitement has calmed, the price has largely held around the $100k level ever since. While most seasoned crypto investors are resigned to the prospect that the price could easily dip again soon, most feel assured that this is just the beginning of a bold new age for Bitcoin in particular. Signs continue to emerge too, that crypto is being embraced (or maybe just admitted begrudgingly) into the traditional world of finance.
The most recent evidence of this was reported earlier this week, as it emerged that asset managers in the US, ranging from wealth management companies to hedge funds and pension funds, had significantly increased their holdings in Bitcoin ETFs during the fourth quarter of 2024. This surge in investments coincided with a 47% rise in Bitcoin’s price over the same period.
Bitcoin ETFs — BTC for beginners?
The U.S. Securities and Exchange Commission (SEC) approved the launch of Bitcoin Exchange-Traded Funds (ETFs) on January 10, 2024. The move finally allowed several Bitcoin ETFs to begin trading the next day, offering investors another way to invest in Bitcoin without having to navigate the process of buying and storing the cryptocurrency.
When Bitcoin ETFs were finally approved by the SEC, the price of Bitcoin itself began climbing as the market recognised that untapped demand for Bitcoin from the risk-averse and technically disinclined investors could suddenly be met. The year that followed saw the biggest and most-successful of those funds mimicking the performance of their core underlying asset, with returns in excess of 100% over their first year.
What’s notable based on data for 2024 is that it would appear that it’s not just technically-disinclined retail investors who have benefited from these gains, but also large-scale Asset Managers who have apportioned some of their investors’ assets into Bitcoin ETFs too.
Key Players and Investments
Movements of any kind often begin slowly and then gather momentum. If the data reported in February is representative of wider trends then it may just signify a more significant shifting of the tides.
State of Wisconsin Investment Board: Their Bitcoin ETF holdings more than doubled to 6 million shares of the iShares Bitcoin Trust ETF by December 31, 2024.
Tudor Investment Corp: This hedge fund manager increased its holdings in the iShares ETF from 4.4 million shares to 8 million shares, with the value of these holdings soaring to $426.9 million.
Mubadala Investment Co: An Abu Dhabi sovereign wealth fund, made its first foray into Bitcoin ETFs, acquiring an 8.2 million share stake worth $436.9 million.
Hunting Hill Capital: This hedge fund re-emerged as a significant investor in Bitcoin ETFs, with positions valued at about $131 million by the end of the year.
The rise in Bitcoin’s value and the growing acceptance of cryptocurrencies as an asset class have driven asset managers to boost their exposure to Bitcoin ETFs. The launch of Bitcoin ETFs in January 2024 provided a new avenue for institutional investors to gain exposure to the cryptocurrency market. Data for the last quarter of 2024 suggests that many Asset Managers have been drawn by the scale of potential returns from having at least a little exposure to Bitcoin.
Further signs of acceptance
There have been several notable trends over the past six months indicating a growing acceptance and embracing of Bitcoin by retail investors, institutional investors, and the traditional world of finance:
Retail Investors
Increased Transactions: Bitcoin transactions under $10,000 have jumped by 13% since October 2024, reflecting a resurgence of activity from smaller, non-institutional players. It’s typical that when prices hit all-time highs, new investors are drawn to take their first stake, ignoring the adage to buy-low, sell-high. The recent Bitcoin all-time-high was no different.
Ownership: Retail investors hold about 9.5% of the total Bitcoin supply, showing a steady interest in the cryptocurrency. This is still a relatively small piece of the Bitcoin pie, but it shows that there are plenty of individuals who see potential for improving their financial position by owning at least a little Bitcoin.
Institutional Investors
Strategic Investments: Companies like MicroStrategy, BlackRock, and ARK Invest have significantly increased their Bitcoin holdings, and tech giants like Microsoft are consulting shareholders on motions to invest corporate treasury into the cryptocurrency. While this has yet to become mainstream, signs are there of an emergent trend.
Bitcoin ETFs: It bears repeating, that spot Bitcoin ETFs have surpassed $41 billion in inflows, making it easier for institutional investors to include Bitcoin in their portfolios.
Bitcoin as a Hedge: Institutions are viewing Bitcoin as a hedge against inflation and economic instability, drawn by the notion that unlike conventional currencies, the money printer can’t just be turned on when governments need more money. Bitcoin is deflationary where currencies like the dollar remain subject to the adverse effects of quantitative easing through money-printing.
Traditional Finance
Integration: Bitcoin has been increasingly integrated into traditional financial systems, with banks and asset managers offering trading services and funds tied to the cryptocurrency. The floodgates for such integration will likely open further now that the efforts by past-regulators through Operation Chokepoint 2.0 have been exposed and quashed.
Regulatory Attention: The growing acceptance of Bitcoin has attracted regulatory attention, further legitimizing its role in the financial system. Initiatives put forward by President Trump will see regulatory frameworks that could well promote the proliferation of crypto-friendly laws where tighter-regulation previously seemed inevitable.
Tokenization: The tokenization of real-world assets (like property and commodities) on blockchain platforms is transforming traditional finance by enhancing liquidity and accessibility, demonstrating that innovation and advancement are a baked-in part of the world of cryptocurrency, with new use-cases and beneficial effects emerging constantly.
Beware of confirmation bias
It’s seductive to look around for reasons that substantiate your own point of view. Naturally, as a Bitcoiner and crypto-advocate I want to believe that the future is bright. Considering that the positive signs span not just the world of fellow-enthusiasts, but also into the world of conventional finance, it’s hard not to feel positive.
The trends described above seem to highlight a significant shift towards the mainstream acceptance of Bitcoin across various investor groups and the traditional financial world. Long may it continue.
Note: This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.