Published: May 29th, 2024
Bitcoin exchange-traded funds (ETFs), the recently-approved investment instruments that track the crypto asset’s price moves, now have custody of more than one million BTC.
According to data released on Monday by Coinglass, 30-plus Bitcoin ETFs now collectively own 1,002,341 BTC. Those holdings represent roughly five per cent of the BTC supply currently in circulation globally and had an approximate value of USD 70.5 billion at time of writing.
That figure is about five times larger than the hoard held by MicroStrategy, one of the biggest corporate holders of Bitcoin. The company lists its current BTC investments at 214,400 BTC, worth about USD 15 billion.
Most of the ETF holdings are under the control of the major American Bitcoin spot ETFs approved by the SEC in January, and which overshot the performance of every previous ETF launch in history. BlackRock’s iShares Bitcoin Trust (287,167 BTC) and the Grayscale Bitcoin Trust (289,039 BTC) cumulatively command over half the ETF Bitcoin.
The next largest positions are held by Fidelity Wise Origin Bitcoin Trust (161,537 BTC), Ark 21Shares Bitcoin ETF (48,443 BTC), and the Bitwise Bitcoin ETF (36,184 BTC). Outside the US, Canada’s Purpose Bitcoin ETF continues to be the largest Bitcoin ETF holding globally at 27,110 BTC. It was also the first spot Bitcoin ETF to launch anywhere.
Bitcoin ETFs give investors limited exposure to Bitcoin price moves and wrap the asset with other more stable securities inside a retirement or other tax-optimized account. They can also act as a vehicle for corporations and large financial institutions who want access to crypto markets in jurisdictions where they are blocked by law from buying crypto assets directly on an exchange.
In April of last year, Whales, institutions, corporates and other large investors went bullish on Bitcoin , with more than USD 114 million flowing into BTC funds.
A report from digital assets firm CoinShares said big investors were pouring their millions into leading Bitcoin funds, and had been for four-weeks running, in what analysts called a ‘flight to safety’. The biggest beneficiaries of new inflows were established funds for accredited investors from firms like 21 Shares, 3iQ, and Grayscale.
BTC was the main focus by far, attracting USD 103 million in new investment. The growth happened against a wider market backdrop that has led to ‘very low volumes’ in Bitcoin trades generally, CoinShares said.
CoinShares noted in the report that improving prospects for crypto as an asset class was down to fears about the ‘ongoing challenges’ being experienced by traditional finance over the past three months.
Revisiting a trend first seen in early 2022, major investors took another look at Bitcoin and liked what they saw. Confidence in traditional finance had been shaken by the recent collapse of Silicon Valley Bank, Signature Bank and Credit Suisse in Europe.
Ethereum, the second-place coin by market capitalization, also implemented its Shanghai blockchain upgrade in mid-April, enabling the withdrawal of staked ETH by network users.
Analysts predicted that more than USD 300 million of the coin would be sold-off in the aftermath of the upgrade, but ETH’s price has actually risen since Shanghai was implemented.
Perhaps buoyed by the surge in investor interest, Bitcoin’s price held firm at just above USD 30,000 for most of the month.
In April of 2022, a previous CoinShares report found that crypto markets were losing ground, firming up an emerging consensus that the crypto winter would extend into summer and possibly beyond.
Total market cap had fallen to USD 1.4 trillion while BTC’s price was also sliding towards USD 30,000.
Whales reacted by using price volatility to shift more assets into Bitcoin, Ethereum, and exchange-traded instruments that derive their value from other cryptocurrencies.
It's worth noting that we haven’t witnessed the same spike in investment product trading activity as we would expect to see during extreme periods of price weakness,’ the forward to the CoinShares report says. 'The question is: does this mean the month-long run of negative crypto sentiment we’ve seen is finished?’
One reason mooted for the anomaly was the fact that price action which had tanked Bitcoin and Ethereum to depths some 50 per cent below their all-time highs was actually less drastic than falls seen in previous bear markets.
‘Compared to the deepest lows of past BTC bear markets, the current movements aren’t as bad. In June July 2021 BTC reached a drawdown of -53.3 per cent, and the crypto bear markets of 2015, 2018 and 2020 saw lows between –77 per cent and –85 per cent off their all-time-highs.’
What did increase in Spring 2022 was price speculation. A record amount of money, USD 4 million, flowed into Bitcoin short positions in April 2022. Investors created more ‘shorts,’ using derivatives like futures to bet on whether an asset would rise or fall in price.
That drove up the total value invested in short Bitcoin products to USD 45 million, a previous all-time-high. Despite that, the value invested in long Bitcoin positions was still far beyond the short money. As a percentage, CoinShares said the USD 45 million in shorts amounted to about 0.15 per cent of the USD 30 billion held in long Bitcoin products.
That indicated sustained crypto optimism, but other analysts said it would likely start to wane.
In a May 2022 newsletter, blockchain analytics firm Glassnode predicted that if prices fell to around USD 33,500 per BTC, it wouldn't be long before crypto investors found themselves facing the same headwinds seen in previous bear markets. Hours after Glassnode’s report was published, BTC fulfilled the prophecy, dropping as low as USD 30,517 before bouncing back slightly.
While CoinShares’ 2022 report analysed exchange-traded funds that offer indirect exposure to cryptocurrencies, Glassnode looked at blockchain wallet data where there was direct exposure to crypto market spot price moves.