Massive Bitcoin ETF Growth Will ‘Continue for Years’, Says Bitwise CIO

The overwhelming demand for Bitcoin spot ETFs over the past two months is likely to continue for many years, predicts Bitwise CIO Matt Hougan.

The executive highlighted “key takeaways” from his interactions with investors and capital allocators this month who are interested in buying into the ETFs—one managed by Bitwise itself.

One takeaway, he recalled in a Twitter post, is that there is “massive dispersion in the pace of adoption of bitcoin ETFs.” While some financial advisors and national account platforms are plugging into the products as early as possible, others aren’t considering any portfolio allocation for their clients—or aren’t enabling them on their platforms until next year.

“The truth is, most professional investors still cannot buy bitcoin ETFs,” Hougan wrote. “That will change through a series of 100+ individual due diligence processes over the next two years.”

Since launching on January 11, the Bitcoin ETFs have absorbed net inflows of $11.7 billion, despite also factoring in over $14.3 billion of old BTC outflows from the Grayscale Bitcoin Trust (GBTC). On Tuesday alone, they took in another $418 million, including $16.7 million for the Bitwise Bitcoin ETF.

Brazil-based Hashdex announced today that it was finally bringing its Bitcoin spot ETF online.

Such flows already represent a massive leg up over previous years when money within institutional Bitcoin funds paled in comparison to today. According to CryptoQuant, this metric has risen from less than $20 billion to over $94.6 billion in the past six months as excitement around the ETFs began to take hold.

On-chain data shows that demand from “accumulation addresses”—Bitcoin addresses that only buy and never sell—has also skyrocketed.

“We estimate monthly Bitcoin demand has increased from 40K Bitcoin at the start of 2024 to 213K Bitcoin currently,” CryptoQuant Head of Research Julio Moreno told Decrypt. “An important part of this demand growth has been driven by ETF buying, but lately also from other large investors.”

Compared to previous years, Hougan also said that investors have dialed up their once ideal 1% Bitcoin portfolio share, now preferring 3% or higher. The executive believes ETFs are the cause, having “de-risked” Bitcoin in the eyes of many.

“Before, people were worried bitcoin could go to zero. In that world, a 1% allocation is all you can stomach,” he said. “But if “going to zero” is off the table, 3% or 5% starts to make more sense.”

According to Coinshares’ Head of Research James Butterfill, most institutional investors remain “very under invested” in Bitcoin, which comprises only a 0.2% average share of their portfolios.

“What proportion Bitcoin ends up being is dependent on risk appetite,” Butterfill told Decrypt, “A 4% position would represent only 100 basis point of additional risk in a regularly rebalanced portfolio.”

Edited by Ryan Ozawa.