When the SEC opened the door in January for bitcoin exchange-traded funds to hit the mainstream, many traditional financial institutions across Wall Street and beyond finally had the chance to purchase into crypto. Since then, money has poured in, but in matches and starts.
On Wednesday, banks and hedge funds with greater than $100 million in assets hit a deadline to file their second-quarter 13F reports, disclosing their investments and what they bought and sold over a three-month stretch.
Goldman Sachs went big within the quarter, while rival Morgan Stanley trimmed its crypto holdings. JPMorgan has yet to make a giant splash.
There aren’t any shortage of opportunities for firms that wish to take their time stepping into the market. Following an array of public ETF listings in January tied to bitcoin, the Securities and Exchange Commission went a step further last month, clearing the best way for spot ether ETFs, allowing investors to get access to the second-largest cryptocurrency. Those recent holdings will start showing up in third-quarter reports.
Within the period from March through June, Goldman Sachs made its debut within the crypto ETF market, purchasing $418 million value of bitcoin funds. Its biggest position is a $238 million ownership in shares of BlackRock’s iShares Bitcoin Trust. The bank also owns shares in spot funds from Grayscale, Invesco, Fidelity and others.
Morgan Stanley was the primary amongst the massive players on Wall Street to offer the green light to its 15,000 financial advisors to start out pitching clients, who’ve a net value north of $1.5 million, bitcoin ETFs, specifically those issued by BlackRock and Fidelity. Up thus far, wealth management businesses have only facilitated trades if customers requested exposure to the brand new spot crypto funds.
Of Morgan Stanley’s $1.5 trillion in assets under management, the bank disclosed in its filing that it trimmed its position in spot bitcoin ETFs to around $189 million from roughly $270 million. Most of those cuts were as a result of sales of just about all of its shares within the Grayscale Bitcoin Trust, which has a much higher management fee than other ETFs. The overwhelming majority of the bank’s spot bitcoin holdings at the moment are through the iShares trust.
JP Morgan reported minimal crypto exposure of around $42,000 value of shares in Grayscale’s bitcoin fund and one other $18,000 value of the ProShares Bitcoin Strategy ETF. HSBC has nearly $3.6 million value of spot bitcoin holdings, all from the fund issued by Ark 21Shares, UBS has around $300,000 value of spot bitcoin ETF holdings, and Bank of America has collective holdings of around $5.3 million, mostly from BlackRock and Fidelity.
For a lot of the banks, the overwhelming majority, if not all, of the ETF flows might be attributed to wealth management clients asking for exposure, fairly than a call by the firm to carry the assets on its balance sheet.
While Wall Street investment banks are coming in slowly, hedge funds are taking a more aggressive approach.
Millennium Management, which oversees $62 billion, now holds over $1.1 billion value of shares in not less than five Bitcoin ETFs, and is the one largest holder of shares in BlackRock’s bitcoin fund, with shares value greater than $371 million in keeping with its August filing.
That is down substantially from the $844 million value of shares it held as of its May filing, having cut its stake in BlackRock’s fund by about half, and in Grayscale’s by greater than half.
London-based Capula Investment Management, one among the highest hedge funds in Europe with $30 billion under management, disclosed in a recent SEC filing that it holds greater than $464 million in spot bitcoin ETFs, including the funds offered by BlackRock and Fidelity.
Point72 Asset Management and Apollo Management have also jumped into the market as have firms including Citadel Advisors, Jane Street and Fortress Investment Group.
Since launching in January, spot bitcoin funds have seen net flows of around $17.5 billion, bringing total assets within the funds to $53.5 billion as of mid-August. Grayscale’s fund, which existed previously and was converted to an ETF, has seen $19.4 billion in outflows because the change, though its recent budget product has seen net inflows of $274 million.
Spot ether ETFs hold greater than $7.6 billion as of Tuesday. Barclays analysts noted that trading volume across all spot crypto ETF products has declined, in comparison with spot exchange volumes.
Still, the brand new ETF activity has helped lift bitcoin prices, which hit a record above $73,000 in March. The value has since dropped sharply, to under $58,000, alongside volatility within the boarder markets, though it’s still up greater than 30% this yr.
“The crypto markets are strong because now we have the sentiment shift,” Galaxy Digital chief Mike Novogratz told CNBC in May. “Crypto is now an asset class. It can be next yr, it’ll be eternally. And it wasn’t that way two years ago. There was risk across the asset class, and it has been de risked.”
Bitcoin mining lures recent investors
ETFs aren’t the one way investors are playing the market.
D1, which managed about $19 billion in the beginning of the yr, bought nearly $5.4 million value of Bitdeer Technologies, $17.3 million of Iris Energy, and nearly $17.4 million in shares of Hut 8 Corp.
Hut 8 said in its first-quarter earnings report that it had purchased Nvidia’s AI processors and secured a customer agreement with a venture-backed AI cloud platform as a part of its expansion. Iris Energy expects to generate as much as $17 million in annual revenue from its AI cloud services.
The combined market capitalization of the 14 major U.S.-listed bitcoin miners hit a record high of $22.8 billion on June 15, in keeping with a note from JPMorgan, which has also been investing capital into an ETF of miners and individual firms. UBS has added shares of Bitdeer, Bitfarms, Bit Digital, Hut 8, in addition to greater than $5 million in Iris Energy, as of its latest 13F filing.
Sundheim, who previously built up a popularity as a savvy investor during his 15-year tenure at Viking Global Investors, has modified his tune on bitcoin. In 2019, he equated Canadian pot firms to the closest thing to a bubble since bitcoin.
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