Investment giants Goldman Sachs and Morgan Stanley have announced that they have a combined $600 million in US spot Bitcoin ETFs. The announcement is a sign of significant optimism in the crypto industry, suggesting that institutional adoption is increasing and paving the way for large companies such as America’s major public pension funds to enter the market.
Dramane Meite, US and European product manager at crypto asset manager Hashdex, said these statements from investment banks “point to a new consensus” regarding the validity of cryptocurrencies.
ETFs have always been eager to attract investment from public pension funds, which control a massive $4.7 trillion pool of assets. But the pension funds have traditionally been known for cautious investment approaches, given that they manage the retirement savings of essential workers such as teachers, nurses and firefighters.
Bitcoin and Ethereum ETFs are helping to ease concerns about crypto’s volatility, and there are signs of a potential shift in sentiment among pension funds. Indeed, Wisconsin’s state investment board purchased $99 million worth of BlackRock’s spot ETF, the iShares Bitcoin Trust.
Meite believes adoption will likely follow a “trickle-down” effect, starting with brokerages and investment banks before reaching public pension funds. That’s why Goldman’s announcements are viewed so positively. The more institutional firms that announce significant crypto assets, the more motivated pension funds will be to do their own due diligence on issuers. “It’s a ripple effect that goes through the market,” Meite said.
While Meite acknowledged that it will take time for pension funds to become comfortable with crypto, he also highlighted the fear of missing out on potential returns. Research from Franklin Templeton shows that Bitcoin has outperformed most tech stocks over the past decade, providing additional incentive for institutional investors to explore the potential benefits of crypto investments.
*This is not investment advice.