Sokipiriye Dokubo
The Chief Investment Officer (CIO) at Bitwise, Matt Hougan, has highlighted the quick and growing trend of investment advisors utilizing spot Bitcoin (BTC) exchange-traded funds (ETFs). He noted their rapid embrace of these funds compared to any previous ETF launches. This comment followed a post by financial expert Jim Bianco on September 8, 2024.
Bianco indicated that investment advisors contribute to less than 10% of the assets in U.S.-traded spot Bitcoin ETFs, labeling them as a “small tourist tool” instead of a meaningful option for advisors.
Substantial Inflows from Advisors
In response, Hougan provided clarification regarding investment advisor contributions to BlackRock’s iShares Bitcoin Trust (IBIT), noting that they have invested around $1.45 billion into this fund. While this amount is a fraction of the total $46 billion across all spot Bitcoin ETFs, Hougan pointed out that this sum ranks IBIT among the fastest-growing ETFs of 2024, second only to another fund.
He compared IBIT’s growth to KLMT, an ESG ETF experiencing even faster growth, largely attributed to a singular $2 billion investment from one entity, while trading a mere 250 shares daily, indicating low advisor engagement. Conversely, IBIT is seeing rapid adoption from a broad range of advisors despite the comparatively smaller dollar valuations.
Advisor Growth Trends
Hougan highlighted that investment advisors are adopting Bitcoin ETFs faster than any previous ETF, despite experiencing lower inflows than institutional investors. He explained that advisor contributions, while modest, reflect a significant trend being overshadowed by larger investments from other investors.
Supporting Hougan’s statements, Eric Balchunas, a senior ETF analyst at Bloomberg, affirmed that the $1.5 billion from advisors showcases more organic growth for Bitcoin ETFs than any others from 2024. This trend indicates a rising interest among financial advisors toward Bitcoin ETFs as investment options.
Addressing Outflows
Bianco’s comments came during a time marked by notable outflows from U.S.-traded spot Bitcoin ETFs. Data from Farside Investors showed that these ETFs experienced a loss of $706 million in one week, including $288 million in outflows on September 3 alone. However, Balchunas argued that these numbers only represent 0.5% of the total assets under management (AUM) for Bitcoin ETFs, suggesting that investors are overly sensitive to outflows following previous rapid growth. He likened this sensitivity to “Princess and the Pea Syndrome,” where even minor setbacks are perceived as significant.
Balchunas further clarified that an ETF’s health should be evaluated based on inflows, as the total AUM can fluctuate with price changes of underlying assets. In this light, Bitcoin ETFs remain strong, with over 1,000 institutional holders already recorded after just two reporting periods – a figure he described as unprecedented.
He also highlighted that currently, 20% of IBIT’s shares are owned by institutional and large advisory firms, expecting this percentage to rise to 40% in the upcoming year, reinforcing the importance of Bitcoin ETFs within institutional investments.
In conclusion, while there may be skepticism about the swift adoption among financial advisors, both Hougan and Balchunas stress that the increasing advisor-driven inflows into Bitcoin ETFs indicate a solid and persistent interest in cryptocurrency, with expectations for further growth in the next year.