When the SEC opened the door in January for bitcoin exchange-traded funds to reach the mainstream, many traditional financial institutions on Wall Street and beyond finally had the opportunity to buy crypto. Since then, money has poured in, but fit and started.
On Wednesday, banks and hedge funds with more than $100 million in assets hit a deadline to file second-quarter 13F reports, disclosing their investments and what they bought and sold during the three months.
Goldman Sachs go wide in the quarter, when competing Morgan Stanley trimmed crypto holdings. JPMorgan hasn’t made a big splash yet.
There is no shortage of opportunities for companies that want to take their time to market. After multiple listings of public ETFs in January linked to bitcoin, the Securities and Exchange Commission has gone one step further last month, clearing the way for spot ether ETFs, allowing investors to gain access to the second largest cryptocurrency. The new ownership will be reflected in the third quarter report.
In the period from March to June, Goldman Sachs made its debut in the crypto ETF market, buying $418 million worth of bitcoin funds. His largest position is a $238 million holding in BlackRock’s iShares Bitcoin Trust. The bank also has stakes in spot funds from Grayscale, Invesco, Fidelity and others.
Morgan Stanley is the first among the big players on Wall Street to give the green light to 15,000 financial advisors to start creating for clients, who have a net worth north of $1.5 million, bitcoin ETFs, specifically issued by BlackRock and Fidelity. Up to this point, the wealth management business only facilitated trades if customers requested exposure to new crypto spot funds.
Of the $1.5 trillion Morgan Stanley assets under management, the bank said in a filing that it has reduced its position in spot bitcoin ETFs to about $189 million from about $270 million. Most of the cut was due to the sale of almost all of its shares in the Grayscale Bitcoin Trust, which has higher management fees than other ETFs. Most of the bitcoin holdings in banks today are through iShares trusts.
JP Morgan reported minimal crypto exposure of $42,000 in shares in the Grayscale bitcoin fund and another $18,000 in the ProShares Bitcoin Strategy ETF. HSBC has almost $3.6 million worth of bitcoin holdings, all from funds issued by Ark 21Shares, UBS has around $300,000 worth of Bitcoin ETF Holdings, and Bank of America has a joint ownership of about $ 5.3 million, mostly from BlackRock and Fidelity.
For most banks, the majority, if not all, of ETF flows can be attributed to wealth management clients seeking exposure, rather than corporate decisions to hold these assets on their balance sheets.
While Wall Street investment banks are coming along slowly, hedge funds are taking a more aggressive approach.
Millennium Management, which oversees $62 billion, currently holds over $1.1 billion worth of shares in at least five Bitcoin ETFs, and has one of the largest holdings in the BlackRock bitcoin fund, with shares worth more than $371 million according to its August filing. .
That’s down sharply from the $844 million worth of shares he held when he filed in May, after cutting his stake in the BlackRock fund by about half, and in Grayscale by more than half.
London-based Capula Investment Management, one of Europe’s top hedge funds with $30 billion under management, disclosed in a recent SEC filing that it holds more than $464 million in spot bitcoin ETFs, including funds offered by BlackRock and Fidelity.
Point72 Asset Management and Apollo Management have also jumped into the market as they own companies including Citadel Advisors, Jane Street and Fortress Investment Group.
Since launching in January, the spot bitcoin fund has seen net flows of around $17.5 billion, bringing total assets in the fund to $53.5 billion as of mid-August. The Grayscale fund, which existed before and was converted into an ETF, has seen $19.4 billion in outflows since the change, although the new budget product has seen net inflows of $274 million.
Point ether The ETF held more than $7.6 billion on Tuesday. Barclays analysts noted that the trading volume in all spot crypto ETF products has decreased, compared to the volume of spot exchanges.
Still, recent ETF activity has helped lift the price of bitcoin, which hit a record high above $73,000 in March. The price has since fallen sharply, to $58,000, along with volatility in the boarder market, although it is still up more than 30% this year.
“The crypto market is strong because we have a change in sentiment,” Galaxy Digital chief Mike Novogratz told CNBC in May. “Crypto is now an asset class. It will be next year, it will be forever. And it was not like two years ago. There is risk in the asset class, and it has been de-risked.”
Bitcoin mining attracts new investors
ETFs aren’t the only way investors play the market.
D1 Capital’s Daniel Sundheim built up his bitcoin mining position in the latest quarter, taking advantage of his shift as a miner retrofitting facilities to service artificial intelligence clients. Like crypto mining, artificial intelligence workloads require a lot of power.
D1, which managed about $19 billion at the start of the year, bought nearly $5.4 million Bitdeer Technology$17.3 million from Iris Energyand nearly $17.4 million in shares from Hut 8 Corp.
Hut 8 said in its first quarter earnings report that it has been purchased Nvidia’s AI processors and gaining customer approval with venture-backed AI cloud platforms are part of the expansion. Iris Energy expects to generate up to $17 million in annual revenue from AI cloud services.
The combined market capitalization of the 14 major bitcoin miners listed in the US hit a record high of $22.8 billion on June 15, according to records from JPMorgan, which has also invested capital into miner ETFs and individual companies. UBS has added stakes in Bitdeer, Bitfarms, Bit Digital, Hut 8, as well as more than $5 million in Iris Energy, according to its latest 13F filing.
Sundheim, who previously built a reputation as a shrewd investor during his 15-year tenure at Viking Global Investors, has changed his tune on bitcoin. In 2019, he listed Canadian pot companies as the closest to a bubble since bitcoin.
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