Millennium, Point72 and Citadel Are Among Buyers of Bitcoin ETFs

(Bloomberg) — When it comes to Bitcoin ETFs, it’s not just the retail trading community that’s at risk. It is now clear that hedge funds, pension funds and banks are also pouring capital into exchange-traded funds after their blockbuster debuts more than a decade ago.

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The most prominent buyers to emerge include hedge funds such as Millennium Management, which owns nearly $2 billion worth of stakes in at least four Bitcoin ETFs, as well as Steven Cohen’s Point72 Asset Management, Elliott Investment Management and Citadel Advisors.

Others ranged from the Wisconsin State Board of Investment to the Bank of Montreal, among firms that crossed geographies from Hong Kong to the Cayman Islands to Puerto Rico and Switzerland. Nearly 1,000 filers held shares in ETFs after Wednesday’s deadline to file first-quarter 13F reports with the U.S. Securities and Exchange Commission, according to a Bloomberg analysis of filings.

The reports only represent a snapshot at the end of the first quarter, and it’s impossible to know without confirmation why money managers are holding ETFs. They’re probably not all Bitcoin bulls. Some may have opened positions as part of a trade to profit from the volatility of the cryptocurrency or to offset a short position in derivatives. Others may have purchased ETFs as part of basis trading, a popular strategy that takes advantage of price differences between spot and futures markets without the hassle of trading Bitcoin directly. And some trading strategies are pattern-driven, meaning investments are not indicative of any view on Bitcoin’s fundamental value.

Millennium, Point72 and SWIB declined to comment. Others did not immediately respond to a request for comment.

Still, if there’s anything to glean from these initial filings since the launch of Bitcoin ETFs, it’s that, whatever the reason, Wall Street has its foot in the door on the world’s largest digital asset.

“13F releases show that growth in Bitcoin ETFs cannot be attributed solely to retail investors buying from brokerage accounts,” said Stephane Ouellette, CEO of FRNT Financial. “But portfolio managers, institutional investors and banks have at least begun to test the waters on ownership.”

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For now, retail investors own most of the publicly traded holdings in Bitcoin ETFs, according to Matt Hougan, chief investment officer at Bitwise Asset Management.

“We often find that professionals do a small personal allocation before allocating on behalf of clients,” he wrote in a note. “They want to test things before exposing their investors.”

BlackRock’s iShares Bitcoin Trust (IBIT) was held by approximately 420 firms that filed for 13F, making it the clear market leader after eclipsing all its peers in terms of inflows. Fidelity Wise Origin Bitcoin Fund (FBTC) was held by more than 230 applicants. According to data compiled by Bloomberg, Grayscale Bitcoin Trust (GBTC) had more than 620 13F investors and had a total market capitalization of approximately $8.4 billion.

The average number of holders of other ETFs launched around the same time in January is around three to five, according to data compiled by Bloomberg Intelligence’s Eric Balchunas. When the first gold ETF was launched in 2004, initial 13F filings showed approximately 95 professional firms invested in the product, according to Bitwise’s Hougan.

“This will likely continue to expand as investment allocations of new assets typically occur in phases and many funds/platforms are still working on due diligence and onboarding,” said Noelle Acheson, author of the Crypto Is Macro Now newsletter. “Also, investment interest will pick up again when the market picks up; it has been directionless for several weeks.”

Over the past few months, market participants have been admiring the flow of money into these ETFs as they have been breaking records one after another. In February, BlackRock’s IBIT was marked by a record $520 million in one day; This was one of the largest daily inflows ever for any U.S. ETF across all asset classes, quickly followed by an inflow of $612 million.

The demand for ETFs is undeniably clear. Not exactly the reasons behind the purchase.

It’s just a diversification tool, according to Ben Brocker, investment strategist at Legacy Wealth, which has about $450 million in assets. His Minneapolis-based firm first invested in Bitcoin through GBTC in 2020 before pivoting to an ETF this year and eventually taking over Fidelity’s Bitcoin fund. The firm allocates a modest 2% given the cryptocurrency’s price volatility. Brocker said Legacy Wealth decided to “get through this” and is now “much better on the other side.”

“Like everyone else, we were big skeptics about Bitcoin for years, and we finally discovered a few things about it,” he said by phone. “We believe that in this digital age there is a better monetary asset than gold. It is mistakenly compared to other cash flow investment assets such as bonds, real estate, or stocks. But I really think it should be viewed as a monetary asset.

For others like Chad Koehn, chief executive officer of United Capital Management, who manages more than $500 million in discretionary assets, it was all about getting into the right vehicle at the right time. Koehn, who is also a competitive rodeo athlete, firmly believes that Bitcoin has something that other assets cannot offer. Koehn became interested in Bitcoin shortly after it was created and officially made his first investment in 2013.

“Why do we believe in Bitcoin bullishness? “The answer lies in Web3’s innovative ledger technology,” he said. “It doesn’t bother me at all when competitors make fun of me. It’s hard to understand how quickly digital ledger technology is revolutionizing business transactions and how important digital asset classes are to hedge against inflation and currency depreciation.” “I think they are naive.”

Read more: Retirement, Cowboy and Other Bitcoin ETF Buyers: Bloomberg Crypto

–With help from Denise Cochran and Matt Mancuso.

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