Bitcoin investment: Small funds dominate, institutional investors remain on the sidelines

According to Reuters, from an investment perspective, Bitcoin mainly exists in funds held by small investors because larger investors are still concerned about it.

Jeremy Millar, founder and managing partner of Ledger Partners in London, estimates that 50% to 90% of bitcoin’s $6.4 billion market cap is invested in “institutional-like” funds held by individuals in hedge funds and family offices.

Pantera Introduces Bitcoin

The largest Bitcoin holder is the Pantera Bitcoin Fund, a $160 million hedge fund.

The currency’s early association with speculation and criminal sites did not endear it to traditional investors.

Millar did not provide an estimate of the amount of Bitcoin held by institutional investors, but said such accumulation would likely be dwarfed by that of small and medium-sized investors who have fewer constraints in allocating their funds.

“It’s clear that over the past two years, Bitcoin has moved from ‘hacktivism’ to a more institutionalized ecosystem that includes participation from hedge funds, traders, and professional investors,” Millar said.

Pantera Bitcoin Fund, based in San Francisco, California, is a hedge fund founded by Dan Morehead in 2013 that provides individuals with $50,000 or more for investment. The fund profile states that when the fund was launched in July 2013, Bitcoin BTC=BTSP was trading at about $65. On Thursday, its trading price rose to $418.80, and its gains since July 2013 have exceeded 500%. Pantera has not commented on the fund's performance or its investors.

Top holders Grayscale

Grayscale Bitcoin Investment Trust (GBTC) is the only publicly traded U.S. security investment company in the over-the-counter cryptocurrency market and has over $60 million in assets. Bitcoin advocate Barry Silbert and his Digital Currency Group also support GBTC.

Antonis Polemitis, managing director of New York-based Ledra Capital, which is focusing on education and technology, said clients have allocated 1% to 3% of their portfolios to bitcoin. He added that a 1% loss would not change anyone's lifestyle.

GBTC Submission Results

Chris Burniske, an analyst and leader of ARK Investments’ blockchain products, said that since September 2015, GBTC has delivered 67 basis points to the Next Generation Internet ETF and 62 basis points to the ARK Innovation ETF.

The Next Generation ETF returned 15.29 percent in 2015, while the Innovator ETF gained 3.76 percent.

GBTC is a diversification firm of Kingsbridge Wealth Management, a multi-family firm in Las Vegas, Nevada, with $150 million in assets. Kingsbridge is an outstanding diversification firm because of its low correlation with other asset classes, said David Dunn, Kingsbridge’s founder and chief investment officer. The firm has about $1.7 million invested in Bitcoin and blockchain.