Bloomberg: Big funds continue to enter Bitcoin ETFs, attracting $17 billion in net inflows this year

Hedge funds, pensions and banks continue to pour money into exchange-traded funds that invest directly in bitcoin as more traditional investors begin to embrace the asset class, which U.S. regulators grudgingly pushed into the mainstream earlier this year.

The most notable buyers include hedge funds such as Millennium Management, which holds stakes in at least five bitcoin ETFs, according to a Bloomberg analysis of second-quarter SEC filings. The firm, which manages $68 billion in assets, slashed its ETF holdings from the previous quarter but remains the largest holder of most funds, including BlackRock’s iShares Bitcoin Trust, ticker IBIT.

Capula Investment Management, Schonfeld Strategic Advisors and Steven Cohen’s Point72 Asset Management also reported holdings in the ETF. Other buyers included the Wisconsin Investment Board and market makers in locations including Hong Kong, the Cayman Islands, Canada and Switzerland.

Data compiled by Bloomberg show that after Wednesday’s deadline for filing second-quarter 13F reports with the U.S. Securities and Exchange Commission, 701 new funds reported holdings in spot bitcoin ETFs, bringing the total number of holders to nearly 1,950.

The spot Bitcoin ETFs launched in January have exceeded expectations in terms of both fund flows and assets. Overall, the group of ETFs, including new entrants, has attracted $17 billion in net inflows this year, and BlackRock's IBIT has swelled to a $20 billion behemoth. The existence of such ETFs provides an easier way for everyday investors to trade Bitcoin.

Noelle Acheson, author of the newsletter “Crypto Is Macro Now,” said the increase in holders is particularly encouraging given Bitcoin’s poor price performance (down nearly 13% this quarter) and the fact that not many financial advisors are allowed to recommend ETFs to clients.

“This reflects investor conviction and taking the time to ‘do the work,’” she said. “So far, Morgan Stanley is the only large, integrated firm whose financial advisors can recommend a BTC spot ETF for diversified positions. But other firms will follow, which will not only lead to more demand, but also a longer-term perspective.”

In July, a spot Ethereum ETF was also approved. Data compiled by Bloomberg showed that the group had inflows of $1.9 billion, a figure that excludes the $2.3 billion outflow from the Grayscale Ethereum Trust (ETHE), which was converted to an ETF last month.

The 13F filings reported quarterly by qualified institutional investment firms represent only a snapshot in time, and without confirmation, there’s no way to know why fund managers hold these ETFs. Not all of them may be bullish on Bitcoin. Some may open positions to profit from cryptocurrency volatility or offset short positions in derivatives. Others may buy ETFs as part of a basis trade, a popular strategy that exploits price differences between spot and futures markets without having to trade Bitcoin directly.

Buyers in the second quarter included hedge fund Hunting Hill Global Capital, which reported holding IBIT shares. The firm has been involved in the cryptocurrency space since 2016, said Adam Guren, founder and chief investment officer of the firm.

“One of our trading strategies is to provide liquidity in the ETF ecosystem,” he said. “Given the current political tailwinds, we expect to see more products launched in the U.S., including options on the Bitcoin ETF, Solana ETF, and potentially other products. This expansion will create more opportunities for our trading strategies.”