Who Is Buying Up Bitcoin ETFs? Analysts Debate

By Andrew Throuvalas

Record-shattering volumes and flows for the Bitcoin spot ETFs have soundly proven that there is incredible demand for these long-awaited, recently approved investment vehicles. But demand from whom?

Perspectives vary among analysts, but CoinShares’ Head of Research James Butterfill doesn’t think it’s the retail market.

“It is only now that we are seeing the RIA [Registered Investment Advisor] market open up with Carsen Group having just greenlighted ETFs,” Butterfill told Decrypt. “This suggested that the ETF flows in the US have been predominantly institutional.”

On the other hand, Bitwise CIO Matt Hougan said he believes it’s a wide mix of investor types—including a relatively large retail component.

“You’re seeing retail investors come into these ETFs, you’re seeing hedge funds, [and] you’re seeing RIAs or independent financial advisors,” Hougan told CNBC’s Squawk Box on Thursday.

The executive explained that most new ETFs—including Bitcoin ETFs launched by Bitwise, BlackRock, and others—are not immediately “turned on” at major broker-dealers and securities houses or other institutions upon launch.

If this is the case, most new demand for the fast-growing funds would likely be from retail, independent investment advisors, and hedge funds for now.

“I think there’s an even bigger wave coming in a few months as we start to see the major wirehouses turn on… but this has been Bitcoin’s IPO moment,” he continued.

“Wirehouse” is a term for large firms and platforms like Morgan Stanley, Merrill Lynch, UBS, and Bank of America.

While many have welcomed Bitcoin ETFs, some major U.S. players like Merrill Lynch are still blocking clients from being able to access the investment products. Vanguard, the world’s second-largest largest asset manager, also blocks access to Bitcoin ETFs through its platform due to the firm’s “philosophy” around investing.

With the daily volume for Bitcoin ETFs soaring over $7.7 billion on Wednesday, net flows cracking a new high of over $673 million, and Bitcoin’s price approaching all-time highs, those wirehouses may need to onboard the ETFs soon.

“I'm sure pressure is mounting for them,” tweeted Bloomberg ETF analyst Eric Balchunas on Thursday, noting that recent ETF flows are likely “natural demand” for BTC rather than algorithmic buying.

“They like to see [a] track record and get paid off, but with grassroots demand like this they [are] gonna have to expedite,” he continued.

On Wednesday, Balcunas noted that Bitcoin ETFs had more individual trades than the SPY—the SPDR S&P 500 ETF Trust, the world’s largest ETF that tracks the S&P 500 Index—saw the day before, suggesting a larger “retail component” to the investment base than he anticipated.

Butterfill, however, said it's hard to estimate the total number of trades taking place. “They may well be disaggregated to assist in placing,” he said.

Macro investment analyst Jim Bianco likened Bitcoin’s recent pump to the retail-based GameStop frenzy in 2021, based on the size of the average Bitcoin ETF trade being roughly $13,000.

Balchunas, however, said this analysis was a slight stretch:

“These aren’t on big advisor platforms yet. Also, some trades were sizable,” he replied. “This is not GameStop retail. This is ETF retail. Big difference.”

Edited by Ryan Ozawa.

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