You didn’t have to pay close attention to the markets lately to notice that Bitcoin ETFs once again dominated headlines this week, in every sphere except that of retail investors.
In a recent talk at X, Bitwise CIO Matt Hougan challenged the common belief that financial instruments are a consequence of retail hysteria. He said that institutional interest in such instruments is sweeping markets and setting records.
Bitcoin ETFs have raised nearly $18 billion since the beginning of the year. That’s impressive considering the Nasdaq-100 QQQs raised $5 billion in their first year. Bitcoin ETFs are well on their way to surpassing one of the best ETFs in history.
1/ Bitcoin ETFs are being adopted by institutional investors faster than any other ETF in history. Don’t believe the “it’s just retail” story. The data proves otherwise.
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— Matt Hougan (@Matt_Hougan) August 21, 2024
Retail vs. Institutional: The Numbers Game
Critics aren’t entirely sold on the hype, though. They argue that Bitcoin ETFs are still largely retail-driven. By the second quarter of 2024, institutional investors held just 20% of AUM in BTC ETFs via quarterly disclosures known as 13Fs. The remaining 80% is held by retail-grade investors, an imbalance that has led some to question just how institutional these funds are.
Bitcoin is now valued at $64,128. Chart: TradingView
Institutional Adoption: One Step Closer
According to regulatory documents cited by Reuters, Goldman Sachs and Morgan Stanley made a splash in the second quarter of 2024 by making a significant investment in a spot Bitcoin ETF. Goldman Sachs raised about $418 million in Bitcoin ETFs, including $238 million in the iShares Bitcoin Trust. With nearly 7 million shares as of June 30, Goldman ranks near the top of institutional investors in the space.
Morgan Stanley came close, investing $188 million in BlackRock’s iShares Bitcoin ETF. These investments, in addition to stakes in the Ark 21Shares Bitcoin ETF and Grayscale Bitcoin Trust, underscore growing institutional interest in Bitcoin ETFs, perhaps overshadowed by massive retail inflows.
Bitcoin: A Unique Market Position
Such a narrative that Bitcoin ETFs are entirely driven by retail trading would not reflect the bigger picture. While retail capital has been flowing into these products, that should not mean that institutions are not heavily involved. In fact, it could be argued that forceful retail interest is tilting the scales of perception, making institutional adoption seem less influential than it actually is.
Hougan’s analysis suggests that despite the dominance of retail investors, Bitcoin ETFs are rapidly catching on in institutions. Not only is the growth trajectory of these ETFs impressive, but it actually represents a broader institutional acceptance of Bitcoin—a fact all the more remarkable given the kind of skepticism traditionally ascribed to cryptocurrencies by customary finance.
Featured image from Pexels, chart from TradingView
