(Kitco News) – The launch of spot Bitcoin (BTC) exchange-traded funds (ETFs) in the U.S. was predicted to usher in a new era of institutional adoption for cryptocurrencies and send Bitcoin’s price soaring above $100,000, but thus far, the price rally has stalled below $70,000 as institutions have been slow to start making allocations.
That could soon change, however, as pension funds are starting to explore investing in Bitcoin, and with more than $4 trillion in capital held by funds in the U.S., even a small percent allocation could drive significant inflows.
According to Manuel Nordeste, Fidelity’s Vice President of Digital Assets, the company has started to engage with major pension funds about the possibility of investing in Bitcoin via ETFs, and the list of interested parties is growing.
"Now, we're starting to have conversations with the larger, real money institutional investor types, and we're getting some of those clients, as well as corporates and so on,” Nordeste said during a recent speaking engagement.
Pension funds have historically been more cautious about risky investments like crypto due to strict risk management protocols; however, the launch of spot BTC ETFs has opened the door to allocating using an investment vehicle with which they are familiar.
“Small-scale but sophisticated investors like family offices are more active in crypto investments because they can quickly adapt to new opportunities, unlike pension plans which require thorough deliberation,” Nordeste explained.
If pension funds follow smaller-scale investors like family offices and hedge funds into the crypto realm, it could signify a major move toward mainstream digital asset acceptance.
Nordeste’s comments came on the heels of reports from BlackRock that they have been having educational conversations about Bitcoin ETFs with institutional players like sovereign wealth funds and pension funds.
“Many of these interested firms – whether we’re talking about pensions, endowments, sovereign wealth funds, insurers, other asset managers, family offices – are having ongoing diligence and research conversations, and we’re playing a role from an education perspective,” said Robert Mitchnick, BlackRock’s head of digital assets.
And it's not just Bitcoin that has caught the attention of large investors as stablecoins and real-world asset tokenization are also areas where they are showing a high level of interest.
“When we think about this space, we see the potential for digital assets to benefit our clients and capital markets, with a focus in three areas: cryptoassets, stablecoins, and tokenization,” Mitchnick said. “And these pillars, they're all interrelated. That's a really important thing for people to understand. And the work that we do across each informs our strategy and our insights for the others.”
According to a filing with the U.S. Securities and Exchange Commission (SEC), BNP Paribas, Europe’s second-largest bank, recently acquired $40,000 worth of BlackRock’s iShares Bitcoin Trust (IBIT), putting the bank ahead of many US wealth and pension funds in adopting Bitcoin-based investment products.
Despite the small scale of the allocation when considering the bank has $600 billion in assets under management (AUM), the move is significant as it marks one of the first instances where a major European bank has allocated to Bitcoin via an ETF. This signals an increasing acceptance of crypto among conventional financial entities.
A 13F filing by Global Retirement Partners (GRP), a retirement consulting firm with over $140 billion in AUM, shows the firm has also started making allocations to Bitcoin ETFs. According to Julian Fahrer, co-founder and CEO of Apollo Stats, GRP currently holds shares in seven different Bitcoin ETFs and one Bitcoin mining ETF.
Fahrer also reported that Susquehanna International Group, a leader in quantitative trading, has become one of the biggest institutional Bitcoin whales, allocating $831 million across the ten ETFs.
Correction: the total is even higher! (had the wrong GBTC price). Total holdings of Susquehanna: $1.2B+ https://t.co/KJEN4c9I3e
— Julian Fahrer (@Julian__Fahrer) May 7, 2024
Fahrer reported the figures from Susquehanna’s May 7 13F filing, which listed the value of the firm’s Bitcoin ETFs portfolio as of March 31, 2024.
The most recent update from Fahrer came on Wednesday, showing US Bank, the fifth largest bank in the United States. with $405 billion in AUM, holds $14 million worth of shares in Bitcoin ETFs.
And it's not just U.S. or European-based asset managers getting in on the action as the launch of spot BTC and Ethereum ETFs in Hong Kong has spurred institutions in the region to start making allocations.
? JUST IN: ?? More Hong Kong #Bitcoin ETF whales surface in SEC filings:
Monolith Management and IvyRock Asset Management are now top 5 IBIT holders, with $22m and $16.5M respectively ?— Julian Fahrer (@Julian__Fahrer) May 7, 2024
Other filings from earlier in Q1 2024 have shown a variety of investors, including wealth funds, family offices, and banks, have already allocated a portion of their portfolios to various Bitcoin ETFs. This includes investments by South State Bank ($34 billion AUM), Park Avenue Securities LLC ($9.9 billion AUM), Inscription Capital LLC ($1.3 billion AUM), Wedmonth Private Capital ($1 billion AUM), and American Nation Banks ($637 million AUM).
U.S.-listed Bitcoin ETFs have already experienced record-breaking growth and trading volumes since their launch in January, and if the ramping up interest from institutional investors is any sign, the long-term trajectory appears to be bullish.
We’ve been talking about institutional adoption since 2017, well here it is.
$150k-$200k $BTC on the table.
I was really trying to be conservative with a $100k-$125k prediction, but I also realize the significance of what’s going on and that the game has drastically changed. pic.twitter.com/YhcaWUKvFT— ElonTrades (@ElonTrades) March 2, 2024
