Matt Hougan, CIO of spot Bitcoin ETF issuer Bitwise, says the Bitcoin ETF allocations included in recent 13F filings are just the beginning. Institutional investors' recently disclosed Bitcoin allocations from first-quarter 13F filings were merely a “down payment,” according to the CIO.
Hougan explains that it takes most professional investors between six and twelve months to evaluate cryptocurrency investments. This process typically follows a pattern of due diligence, personal allocation, individual customer allocations and finally platform-wide allocation.
“About six months after the initial distribution, many firms begin to distribute across their entire client books, with allocations ranging from 1-5% of the portfolio,” Hougan wrote in a note to clients Tuesday.
Highlighting the potential of Bitcoin ETFs, Bitwise CIO said, “The great promise of Bitcoin ETFs is that they can open the door for professional investors to purchase BTC en masse, significantly increasing the pool of capital invested in the asset.”
13F filings are quarterly reports filed with the SEC by institutional investment managers with at least $100 million in stock assets under management. These filings provide a snapshot of a manager's stock holdings at the end of each quarter.
Hougan highlighted several firms with significant Bitcoin ETF holdings. The firm Hightower Advisors, the second largest registered investment advisor, owns $68 million worth of spot bitcoin ETFs. Other notable firms include Cambridge Investment Research, Sequoia Financial Advisors, Integrated Advisors and Brown Advisory, with shares worth $40 million, $12 million, $11 million and $4 million, respectively.
A total of 563 professional investment firms reported holding $3.5 billion worth of bitcoin ETFs as of last Thursday. Hougan predicts we could see over 700 professional firms reporting total assets under management approaching $5 billion by the May 15 (today) filing deadline. The ownership scale for the new ETFs is “unorthodox,” according to Hougan.
While individual investors still dominate the ETF market, professional investors account for only 7-10% of ETFs' $50 billion in assets under management so far. However, Hougan argues that this rate will increase significantly given the adoption pattern by institutional investors.
For example, Hightower Advisors' current spot Bitcoin ETF holding amounts to just 0.05% of its assets, according to the CIO. If they follow the typical behavioral pattern Hougan outlines, a 1% allocation over time will equal $1.2 billion from a single firm.
*This is not investment advice.