Bitcoin ETFs Are Back With Nearly $1 Billion In Fresh Cash

By Andrew Throuvalas

Bitcoin bounced back strongly from its April slump last week, boosting the performance of newly launched Bitcoin spot ETFs.

On May 15, the price of BTC surged from $61,800 to $66,000, and is now trading for over $68,500 for the first time in over a month, per CoinGecko data. Meanwhile, net inflows to Bitcoin investment products globally exceeded $942 million, dwarfing $144 million from the previous week—and reversing four straight weeks of net outflows before that. 

According to CoinShares, the sudden resurgence in Bitcoin demand is directly related to evolving macroeconomic conditions. 

“The inflows were an immediate response to the lower-than-expected CPI report on Wednesday, with the latter three trading days of the week making up 89% of the total flows,” the firm’s Head of Research, James Butterfill, wrote in a Monday blog post.

Butterfill later told Decrypt that the demographics of Bitcoin ETFs investors are especially telling.

“What we have seen so far is the most significant allocations being either hedge funds or private equity,” he said. “There are some isolated allocations to large pensions funds, which is very encouraging that less niche funds are buying Bitcoin.”

“But so far the allocation highlighted by 13F filings only represent 25% of the total holdings,” he continued, explaining that “it is likely we will get much more detail" by the final filing deadline on July 15.

Bitcoin price movements have historically correlated with central bank policy expectations, with prices rising as interest rates fall, and vice versa.

With April CPI inflation rising just 0.3 percent month over month, markets have renewed confidence that the Fed may soon conclude its battle to slow rising prices across the country. That should bring lower interest rates, cheaper debt, and higher valuations for both stocks and crypto. 

According to CME FedWatch, markets are 50% confident that the Fed will first lower interest rates by 25 basis points in September. 

Aside from the changing macro outlook, numerous major U.S. investors disclosed allocations to Bitcoin spot ETFs as part of mandatory 13F filings this month. By the end of Q1, exactly 944 unique filers—each of which controls over $100 million in assets—reported owning $10.7 billion worth of Bitcoin ETF shares. Those holdings make up over 20% of total assets in those ETFs. 

One such investor included the State of Wisconsin Investment Board, which held $163 million in BTC across BlackRock and Grayscale’s Bitcoin ETFs as of March 31. As a whole, the pension fund held $155 billion in assets as of Q4 2023.

In a memo last week, Bitwise CIO Matt Hougan said the filings had him “incredibly bullish” on the ETFs, since those massive asset managers who had already invested would likely allocate more over time. 

“Hightower Advisors may have $68 million allocated to Bitcoin ETFs today, for instance, which is great, but it’s just 0.05% of their assets,” he noted. If that were to eventually grow to 1%—as is typical of most investors, in Hougan’s view—that would mean a $1.2 billion allocation from Hightower alone. 

In comments to Decrypt, Butterfill agreed that there is a lot of room for growth, since investment advisors currently dominate the space based on total assets under management—but are not holding much.

"The average portfolio size is very low, implying that investors are just dipping their toes into the market, and could well allocate more as their confidence improves," he said.

In other Bitcoin ETF news, Michael Sonnhenshein, CEO of the world’s largest such fund, Grayscale, stepped down from his position on Monday, saying “the crypto asset class is at an important inflection point and this is the right moment for a smooth transition.”

Edited by Ryan Ozawa. Updated to add comments from CoinShares head of research James Butterfill.

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