Published: May 15th, 2024
One of America's biggest banks revealed a number of investments in Bitcoin ETFs this week. In a regulatory filing, Wells Fargo becomes the latest major institution to build a portfolio using the recently-approved crypto-based instruments.
Paperwork filed with America's Securities and Exchange Commission (SEC) indicate that the bank has purchased shares of Grayscale's GBTC spot Bitcoin exchange-traded fund (ETF), ProShares Bitcoin Strategy ETF (BITO), and holds a position in Bitcoin ATM company Bitcoin Depot Inc. The ProShares ETF provides investors with exposure to BTC futures contracts.
Given Wells Fargo's size, the moves mark a notable entry into the Bitcoin market. Spot Bitcoin ETFs give investors exposure to BTC price movements without having to own the asset directly. For institutional investors seeking a stable market vehicle for BTC exposure, ETFs are seen as a safe way forward.
The news comes amid a wider shift toward institutional acceptance of Bitcoin, with other US banks and financial institutions looking at different vehicles to build BTC into their offerings and gain exposure to the asset.
Last week US investment firm Susquehanna International also disclosed in an SEC filing that it had taken positions in spot Bitcoin and other Bitcoin ETFs, joining a wave of large financial institutions doing the same.
A February 2024 story from Bloomberg claimed that Wells Fargo and Bank of America's Merrill division were both getting ready to offer products that would give their customers exposure to Bitcoin ETFs.
Wells Fargo has frequently talked-up digital assets, even trialing its own digital currency in 2019.
In November 2023, data from CoinShares said that inflows to crypto exchange-traded products (ETPs) amounted to USD 346 million in one week, the highest they’d been over 9 consecutive weeks, bringing year-to-date deposits to USD 1.5 billion.
Deposits into Bitcoin-specific funds for the 2023 YTD came to USD 311 million, or roughly 90 per cent of the cash committed by institutional investors. Because of those inflows and BTC's rising price, the total value of crypto fund assets under management amounted to USD 45 billion.
The US Securities and Exchange Commission (SEC) had staunchly resisted approving spot Bitcoin ETFs because regulators believed there was too much risk of manipulation in crypto markets. Despite that stance, many industry observers noted that the SEC had been signaling that, against its better judgment, approval was likely in the cards.
It's worth noting that a since disproven 2023 report about BlackRock’s Bitcoin ETF application being approved sent Bitcoin 10 per cent higher in one brief October spike. An imposter used Blackrock’s name to register a bogus XRP Trust using the company’s iShares brand. The price of XRP surged on the news and then quickly returned to Earth when BlackRock announced it was a fake.
CoinShares itself had skin in the Bitcoin ETF approval game, announcing that it had secured an option to buy American digital asset manager Valkyrie's ETF business in October 2023.
In late October 2023, BTC shot past Bitcoin shot past USD 34,000, a new record high for the year, as traders rushed to liquidate short positions. The rush led to total BTC liquidations worth USD 145 million across all crypto assets by Wednesday 25th October.
On Coinbase, BTC was trading closer to USD 35,000. The dual rallies were connected to markets anticipating imminent approval of the first Bitcoin spot ETF by the Securities and Exchange Commission (SEC).
On 24th October 2023, a judge in Washington, DC, ordered the SEC to look again at a heavily-litigated and long delayed spot Bitcoin ETF application from Grayscale, after the financial watchdog agency appeared to ignore an earlier court action. A report by Galaxy Digital predicted that spot bitcoin ETFs could attract inflows worth USD 14.4 billion in the first year of issuance.
Global investment giant BlackRock also amended its own BTC ETF application to say that it was now taking initial steps to prepare for launch, going so far as to allocate funds and even registering a ticker symbol. That doesn't mean approval is guaranteed or necessarily coming soon, but it certainly points to growing confidence that the SEC will be compelled to give way.
Crypto analysts said both of the price spikes pierced the previous resistance thresholds of USD 31,000 and USD 34,000. In a note of caution, crypto analyst Rekt Capital tweeted that the bullish price action probably wasn’t enough to annul the ‘Bearish Bitcoin Fractal,’ a pricing methodology that assumes prices sometimes rally to record highs before backsliding.
As adoption increases and crypto markets mature, BTC’s price is increasingly influenced by traditional financial factors. In May of 2022, Bitcoin clawed back losses suffered since the beginning of the year.
In the first 30 days of 2022, the BTC’s price dropped sharply and struggled to find its feet again. IAs Spring settled in, however, the factors for a rebound were already in place.
In February 2022, US Treasury Secretary Yellen told Reuters that she had 'still had some doubts’ about cryptocurrencies but added that she believed innovations to the payment system could have a positive impact. Given her extended history of crypto-skeptic commentary, traders read her more measured language as a sign that change was afoot.
BTC also crossed an important barrier when the impact of price compounding pushed the asset out of the red.
Analysts said BTC’s steady gains in Q1 2022 were likely a sign that the market jitters brought on by Russia’s invasion of Ukraine and the COVID pandemic were starting to subside.
Some of the impact was seen in the DeFi market, where comments by Terraform Labs CEO Do Kwon indicated growing BTC bullishness. Kwan told the Wall Street Journal that he planned on buying ‘billions more’ Bitcoin to fund Terra’s wallet and provide added backing for its stablecoin TerraUSD (UST).