Key Points
- Bitwise CIO Matt Hougan believes Bitcoin ETF allocations in recent 13F filings are just the beginning.
- Professional investors typically take six to 12 months to evaluate crypto investments.
Matt Hougan, the Chief Investment Officer (CIO) at Bitwise, a spot Bitcoin ETF issuer, recently shared his views on the Bitcoin allocations of institutional investors from the first-quarter 13F filings. He believes that these allocations are just the beginning or a “down payment”.
The Evaluation Process of Crypto Investments
Hougan explains that professional investors usually spend six to twelve months evaluating crypto investments. This process involves due diligence, personal allocation, isolated client allocations, and finally, platform-wide allocation phases.
Approximately six months after the initial allocation, many firms start allocating across their entire book of clients. These allocations typically represent 1-5% of the portfolio.
The Promise of Bitcoin ETFs
Bitcoin ETFs carry the potential to open doors for professional investors to invest in Bitcoin on a large scale. This could significantly increase the capital pool investing in the asset.
13F filings are quarterly reports submitted to the SEC by institutional investment managers managing at least $100 million in equity assets. These filings offer a snapshot of the manager’s stock holdings at the end of each quarter.
However, 13F reports only mandate the disclosure of long positions in U.S. equities and options on equities. They do not require the disclosure of short positions, therefore, only providing a partial view of an investment manager’s overall portfolio strategy.
Earlier this week, Bracebridge Capital was revealed as a top holder of Ark Invest’s ARKB and BlackRock’s IBIT spot Bitcoin ETFs. It also holds a significant allocation of Grayscales GBTC. Its combined spot Bitcoin ETF holdings were valued at $434 million as of March 31.
The State of Wisconsin Investment Board also disclosed a $163 million stake in BlackRock and Grayscale’s spot Bitcoin ETFs.
The Growth of Bitcoin ETFs
Hougan highlighted that 563 professional investment firms reported owning $3.5 billion worth of Bitcoin ETFs as of last Thursday. By the May 15 filing deadline, he expects this number to rise to over 700 professional firms and total AUM nearing $5 billion.
Retail still dominates the holdings, with professional investors accounting for just 7-10% of the ETFs’ $50 billion assets under management so far. However, Hougan believes this percentage is likely to increase considerably given the pattern of institutional investor adoption.
As an example, Hightower Advisors’ current spot Bitcoin ETF allocation amounts to just 0.05% of its assets. If they were to follow the typical pattern of behavior Hougan outlined, a 1% allocation in time would equate to $1.2 billion from a single firm. This potential growth leaves Hougan “incredibly bullish” from the initial 13F filings.