The tide is turning in the cryptocurrency world, with institutional investors making a gigantic splash in Bitcoin exchange-traded funds (ETFs) while retail investors seem content to step aside. A recent report by IntotheBlock paints a picture of a two-tier market where hedge funds and even pensions are accumulating Bitcoin through ETFs, but the average investor remains cautious.

Institutional investors are setting out on a cruise with Bitcoin ETFs

The launch of Bitcoin ETFs on the Modern York Stock Exchange in early 2024 was a watershed moment, finally opening the floodgates for institutional money to enter the cryptocurrency market. This was a boon for Bitcoin whales – investors with significant stakes – who acquired gigantic amounts of the cryptocurrency through these fresh financial instruments.

IntotheBlock data shows that these whales collectively collected approx additional 250,000 Bitcoins, restoring its coffers to levels last seen before the 2023 collapse of FTX.

Hedge funds, long expected to be the driving force behind institutional adoption, have lived up to expectations. Financial giants such as Millennium Management have reportedly invested billions in Bitcoin ETFs, signaling their confidence in the cryptocurrency’s future. Public pensions are also at stake, and the state of Wisconsin is making waves by investing $160 million in Bitcoin ETFs.

The US ETF craze is fading, but the journey continues

While the initial adoption of U.S. Bitcoin ETFs was euphoric, and record inflows in January pushed the entire cryptocurrency market higher, the party appears to be slowing down. Experts believe this early growth may have been due to a circumscribed number of enthusiastic supporters of the institution’s adoption. Inflows have slowed in recent weeks, suggesting some investors are taking a wait-and-see approach.

Across the Pacific, the recent launch of Bitcoin ETFs in Hong Kong was met with a muted response. First-day trading volume was just $12.7 million, a far cry from the $4.6 billion recorded by U.S. ETFs when they debuted. This lukewarm reception suggests that the Asian market may not be as willing to adopt cryptocurrencies yet.

Retail investors are dropping anchor, unconvinced by the media hype

Another layer to the convoluted story is the distinct lack of enthusiasm on the part of retail investors. The report highlights a significant decline in the number of fresh Bitcoin addresses, a metric often used to measure retail share. This suggests that many retail investors remain on the sidelines, unconvinced by the recent rally or wary of cryptocurrency’s volatility.

There may be many reasons for this hesitation. The collapse of FTX may have left a sour taste in some investors’ mouths, and a general market correction in early 2024 may prompt caution. Additionally, the complexity of ETFs, combined with the newness of investing in cryptocurrencies for some, can create a wait-and-see attitude among retail investors.

At the time of writing, Bitcoin was listed at USD 67,032, rose 0.7% over the past 24 hours and maintained an impressive 11.0% price gain last week, according to Coingecko data.

Featured image from Pexels, chart from TradingView