In January, the SEC opened the door for bitcoin exchange-traded funds (ETFs) to hit the mainstream, allowing traditional financial institutions across Wall Street and beyond to finally buy into crypto. Since then, money has poured in, but in fits and starts. On Wednesday, banks and hedge funds with more than $100 million in assets hit a deadline to file their second-quarter 13F reports, disclosing their investments and what they bought and sold over a three-month stretch.
Goldman Sachs made a significant move in the quarter, purchasing $418 million worth of bitcoin funds. Its biggest position is a $238 million ownership in shares of BlackRock’s iShares Bitcoin Trust. The bank also owns shares in spot funds from Grayscale, Invesco, Fidelity, and others. On the other hand, Morgan Stanley trimmed down its crypto holdings, while JPMorgan has yet to make a big splash in the market.
Following an array of public ETF listings in January tied to bitcoin, the SEC cleared the way for spot ether ETFs last month, allowing investors to access the second-largest cryptocurrency. These new holdings will start showing up in third-quarter reports.
Morgan Stanley was the first among the big players on Wall Street to give the green light to its 15,000 financial advisors to start pitching clients bitcoin ETFs issued by BlackRock and Fidelity. Wealth management businesses have only facilitated trades if customers requested exposure to the new spot crypto funds. Of Morgan Stanley’s $1.5 trillion in assets under management, the bank disclosed in its filing that it trimmed its position in spot bitcoin ETFs to around $189 million from roughly $270 million.
JP Morgan reported minimal crypto exposure of around $42,000 worth of shares in Grayscale’s bitcoin fund and another $18,000 worth of the ProShares Bitcoin Strategy ETF. Other financial institutions like HSBC, UBS, and Bank of America also disclosed their holdings in spot bitcoin ETFs in their second-quarter reports.
While Wall Street investment banks are coming in slowly, hedge funds are taking a more aggressive approach. Millennium Management, overseeing $62 billion, now holds over $1.1 billion worth of shares in at least five Bitcoin ETFs. London-based Capula Investment Management, with $30 billion under management, disclosed that it holds more than $464 million in spot bitcoin ETFs.
Since launching in January, spot bitcoin funds have seen net flows of around $17.5 billion, bringing total assets in the funds to $53.5 billion as of mid-August. Grayscale’s fund, which existed previously and was converted to an ETF, has seen outflows since the change, though its new budget product has seen net inflows. Spot ether ETFs hold more than $7.6 billion as of Tuesday.
The new ETF activity has helped lift bitcoin prices, which hit a record above $73,000 in March. The price has since dropped sharply, to under $58,000, alongside volatility in the broader markets, though it’s still up more than 30% this year. Galaxy Digital chief Mike Novogratz believes that crypto is now an asset class and will continue to be so in the future.
In addition to ETFs, investors are also playing the market through bitcoin mining. Daniel Sundheim’s D1 Capital built up a bitcoin mining position in the latest quarter, taking advantage of a shift as miners retrofit their facilities to service artificial intelligence clients. Sundheim invested in companies like Bitdeer Technologies, Iris Energy, and Hut 8 Corp, which are involved in AI cloud services and bitcoin mining.
Overall, the entrance of traditional financial institutions and hedge funds into the crypto market through ETFs and mining investments has brought significant attention and capital to the industry. As the market continues to evolve, it will be interesting to see how these institutions navigate the volatile yet promising world of cryptocurrencies.
