Wall Street’s growing crypto ETF ambitions
Nearly 2,000 prominent Wall Street funds have invested in bitcoin ETFs since January.
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
Why crypto is rebounding slower than the stock market. What might be weighing on crypto markets. Also, the latest bipartisan crypto sound bites, and more key headlines.
Crypto ETFs are booming on Wall Street. Inflows have kept up all year, and now finance giants are plotting their next exchange-traded fund moves.
This week in numbers. The percent of Bitcoin’s supply that has been mined, the number of Gen Z and Millennial voters who hold crypto, and more stats to know.
MARKET BYTES
Crypto lags tech stocks as BTC struggles to break out of $60,000 range
For the second week in a row, bitcoin prices have been stuck around the $60,000 mark — sinking as low as $56,153 on Thursday and jumping as high as $61,430 on Monday — with a wide range of factors tugging at markets.
One headwind, at least, seems to be resolving: Payments from long-shuttered crypto exchange Mt. Gox to former users appear to be winding down.
But now, market watchers are paying close attention to the movement of around $12 billion in crypto seized by the U.S. government. Reports of the government selling some of its holdings are “resulting in this temporary downward price pressure,” said Lightning Ventures partner Khushboo Khullar. “We expect this gap to close soon.”
Here are three market stories you should know.
Crypto has lagged rebounding tech stocks
For much of 2024, both crypto and tech stocks were on a tear, with BTC hitting a new all-time high north of $73,000 in March.
But earlier this month, both markets took a major hit following a negative U.S. jobs report and a surprise increase in Japanese interest rates. Tech stocks saw volatility rise to three-year highs, and an index of the ten biggest cryptocurrencies ran into its worst week in two years.
In the weeks since, however, stocks have recovered much of their recent losses, while crypto has struggled to regain similar momentum.
Can crypto catch up? Fears around crypto related to Mt. Gox and the U.S. government potentially diluting markets may be one factor. But late summer also historically tends to be a slow period for crypto. And market watchers are paying close attention to this week’s Jackson Hole conference — where Fed Chair Jerome Powell will be speaking on Friday — for clues to where the economy is headed.
Norway’s vast sovereign wealth fund is bullish on crypto companies
According to a new report from crypto-analysis firm K33 Research, Norway’s $1.7 trillion sovereign wealth fund — which invests income generated by the nation’s oil reserves — has increased its exposure to crypto-related businesses like mining firms. At the same time, the fund has sharply cut back on its exposure to traditional tech stocks.
Indirect injection… Norway’s indirect exposure to BTC (for example, through shares of publicly-traded firms like mining giant Marathon Digital that are closely correlated to the crypto market) was up by 62% in the first half of 2024, according to the report. The analysis notes, however, that the trades are unlikely to be the result of a specific strategy around crypto: “Regardless, it perfectly illustrates how bitcoin is maturing as an asset and getting woven into any well-diversified portfolio.”
Bipartisan crypto consensus continues to grow
Crypto prices spiked earlier this year after Republican presidential candidate Donald Trump spoke at the 2024 Bitcoin Conference. During his speech, Trump said he would make America the “the crypto capital of the planet,” “appoint a new SEC chairman,” and that under his administration the U.S. would “keep 100% of all the bitcoin the U.S. government currently holds or acquires into the future.”
While President Joe Biden gets a D-rating from advocacy organization Stand With Crypto, Democratic presidential candidate Kamala Harris is reportedly seeking a “reset” with the industry.
What they’re saying… Last Wednesday, Democratic leaders including Senate Majority Leader Chuck Schumer and major donors including Mark Cuban attended a virtual town hall for Democratic crypto supporters. Speaking at the event, Schumer pledged to put his weight behind passing comprehensive crypto legislation by the end of the year. “My goal when it comes to crypto regulation is this: I want to bring members on both sides of the aisle here in the Senate together,” Schumer said, “so we can pass sensible legislation that helps the United States maintain its status as the most innovative country in the world.”
WHALE STREET
Crypto ETFs have become big business for Wall Street
By any measure, the U.S. BTC and ETH exchange-traded funds (ETFs) that launched earlier this year have been historic successes. They’ve seen nearly $20 billion of inflows to date, with a large chunk of that capital coming from some of the largest financial institutions in the world.
How large? According to a new report, institutional investors — including hedge funds, pension funds, and investment banking giants like Goldman Sachs — held almost a quarter of the shares in U.S. spot BTC ETFs in the second quarter of 2024.
Let’s dig in.
BlackRock is now the largest crypto ETF manager
BlackRock is the world’s largest asset manager, with more than $10 trillion in assets — and as of August 20, it was also the largest crypto ETF manager on the planet.
The firm’s leading bitcoin and ETH ETFs now hold a collective $21.22 billion in assets. Since it launched in January, the firm’s spot BTC ETF (IBIT) has seen just one day of net outflows. IBIT has also become a hit among institutional investors, with Goldman Sachs and Morgan Stanley holding significant positions (both of which may be holding shares on behalf of clients as part of their private banking and wealth management arms).
Nearly 2,000 of Wall Street’s most prominent funds have invested in BTC ETFs
Among funds that manage more than $100 million, 1,950 hold positions in spot bitcoin ETFs, with more than 700 opening positions in Q2, according to recent filings. (Some of the major firms with significant BTC ETF holdings include Millennium Management, Point72 Asset Management, and Capula Investment Management.)
Overall, institutions owned 24% of all spot bitcoin ETF shares by the end of Q2, up from 21% at the end of Q1, reported Coinbase Institutional. Among those firms, about 37% represent “investment advisors,” suggesting strong interest on the part of their clients.
The sustained demand for crypto ETFs, even as BTC declined by 13% in Q2, bodes well for the durability of the category, according to Coinbase Head of Institutional Research David Duong.
“We think that the continued spot bitcoin ETF inflows during bitcoin’s underperformance may be a promising indicator of sustained interest in crypto from the new pools of capital that the ETFs give access to,” Duong wrote.
Wall Street plots more crypto ETF products
When the SEC approved BTC and ETH ETFs this year, it was the culmination of more than a decade of negotiations between investment firms and regulators. Now that those hurdles have been cleared, bitcoin and ETH ETFs might just be the start of even more crypto investment products.
Franklin Templeton, which manages more than $1.5 trillion in assets, just filed an application for a “crypto index” ETF that would hold both BTC and ETH.
Meanwhile, Fidelity’s Head of Digital Asset Management recently said that she believes an Ethereum ETF that allows for the underlying ETH to be staked is a matter of “when it happens and not necessarily if.”
What’s next?
The Chicago Board Options Exchange (Cboe) just refiled its application to list options on spot bitcoin ETFs, and the Nasdaq and New York Stock Exchange are expected to join the Cboe in the coming days.
The applications could be a sign that U.S. regulators are inching closer to approving options trading for crypto ETFs — which may spur further institutional demand, as firms look to capitalize on strategies involving hedges or leverage during periods of high volatility.
NUMBERS TO KNOW
94%
Percent of bitcoin’s total supply that has been mined as of this week, or 19.74 million BTC out of 21 million BTC. As of April’s halving event, which reduced the amount of new bitcoin that gets unlocked through mining, 3.125 BTC is issued roughly every ten minutes. Many estimates anticipate that all 21 million BTC will be fully mined around the year 2140.
85.66%
The estimated share of ETH’s supply that is currently sitting in profit. This represents the lowest share since November 2023, and is down from 94% just three weeks ago, following ETH’s 30%-plus selloff.
70%
Amount that the Nigerian naira has depreciated against the U.S. dollar in the last year due to inflation. As a result, crypto adoption in Nigeria has surged despite an official crackdown on crypto transactions. Now, however, the nation’s Securities and Exchange Commission has announced plans to issue licenses to crypto exchanges.
25%
Percent of young Americans, ages 18 to 34, who own crypto, according to new research from Coinbase. Noting the importance of this group to the upcoming election (Gen Z and Millennial voters are 40% of all eligible voters), the report says, “candidates on both sides of the aisle who wish to win … must pay attention to the young, diverse, pro-crypto constituency that can make or break campaigns.”
TOKEN TRIVIA
When is the next Bitcoin halving?
A
2025
B
2026
C
2027
D
2028
Find the answer below.
Trivia Answer
D
2028
