The numbers coming through last week were simply extraordinary.
Senior analyst Eric Balchunas at Bloomberg called it ‘mind-boggling’.
12 of the 25 largest US hedge funds were outed as buyers.
As were 11 of the largest 25 Registered Investment Advisors (RIA).
Even a top 10 state pension fund — The Wisconsin Investment Board (US$118 billion fund under management) — has put US$100 million in since January.
And this wave of buying has all come in in just one quarter (Jan-March) of trading.
As Eric Balchunas noted:
‘… we ended up with 414 reported holders in its first 13F season (quarterly report), which is mind-boggling. Even having 20 holders as a newborn fund is highly rare.’
What am I talking about, what are they all buying, and why does it matter to you?
That’s the topic for today.
Let’s begin…
A mad scramble
So what were all these folks investing in?
Bitcoin [BTC] of course!
Or, more accurately, the newly approved Bitcoin ETFs that went live on 11 January this year.
When these new ETFs launched earlier this year, traditional finance had its first real opportunity to invest in Bitcoin.
I said the floodgates would open.
And that’s exactly what we’re starting to see.
In May, we had the first quarterly reporting season where regulated US entities had to disclose any investment in these Bitcoin ETFs.
And as you just saw, the take-up has been very broad across the industry.
Which might surprise you…
I mean, you’ve probably heard for years that Bitcoin had no ‘intrinsic value’, was ‘worthless’ and was only ‘used by criminals’.
And yet, here are the biggest institutions in the US now putting money into it.
If you’ve been sceptical about Bitcoin and the whole cryptocurrency movement in general, this should at least give you some pause for thought.
At the very least, you should acknowledge there’s a disconnect between what big finance says about Bitcoin in public and what they’re actually doing with their own money.
To be clear, this isn’t retail buyers (the mug punters) buying in on these new ETFs but professional money managers with fiduciary duties — and big reputations — at stake.
This isn’t your typical ‘exit liquidity’.
These are buy-and-hold investors with long time frames and strong investment mandates.
One of the more interesting individual companies investing in Bitcoin was Mass Mutual.
They’re a US$570 billion insurance company.
It was revealed they have US$100 million invested in one of the Bitcoin ETFs.
Mass Mutual investing in Bitcoin is notable for a couple of reasons.
First, the company is a conservative investor, meaning it goes for investments that are traditionally low-risk.
Their CEO, Roger Crandall, has said previously that the company gravitates towards tried-and-tested investments. Assets like real estate and stocks.
So, for such a company to plough $100 million into the notoriously volatile Bitcoin signals a changing attitude even in the conservative segments of finance.
If other insurers, pension funds and RIAs follow in these footsteps, the upside gains over the next year or two could be immense — mind boggling, even!
The biggest risk you face
Right now, Bitcoin is still a relatively tiny U$1.2 trillion asset class.
And although the big end of town has started to buy, they’re not doing so with huge sums…yet.
US Bitcoin firm River shared this helpful chart:
| |
| Source: River |
If you look at that RIA figure (RIAs are what we’d call financial planning groups here in Australia), those 405 RIAs probably collectively manage over US$405 billion.
Just US$2.5 billion of that has gone into the Bitcoin ETFs (less than 0.6%) so far.
It’s still a small overall amount in percentage terms, but it’s a big start.
Remember, we’re only one quarter into the new world of Bitcoin ETFs, and most RIAs, pension funds and banks still have ZERO allocated to Bitcoin.
Indeed, in a weird paradox, Bitcoin will have to grow larger to attract the bigger money.
Many investment mandates have rules around minimum liquidity and market size before funds can invest serious dough.
But as the Bitcoin market grows, those same rules will compel them to invest in Bitcoin, causing a flywheel of buying as more and more industry participants race to join in.
For you, the biggest risk you face is being late to this party.
Right now, most of you reading this are probably sitting on zero Bitcoin too.
My strong urge to you today is to think about your own portfolio.
What would a 1% BTC, or even a 3% allocation, look like to you?
Or maybe you’re younger, have cashflow but can’t afford a property, and have no investment plan; maybe you should start thinking about saving in Bitcoin.
Get this…
I did some maths on this the other day, and if you’d put $2,000 per month into Bitcoin over the past five years (starting in 2019), you’d be sitting on over $1.5 million by now.
Yep, $1.5 million!!!
Will the same happen over the next five years?
No one can say for sure.
Of course, Bitcoin is a risky and highly volatile investment.
And yet, right now, the world’s biggest investment institutions have started to buy in.
You’re telling me they’re the suckers, they’re the exit liquidity as the bubble prepares to pop?
I don’t think so…
Making it easy to get off zero
Anyway, do your own research and make your own decisions.
As with any investment, you need to think in terms of both risk AND reward. Bitcoin remains risky, but the upside gains are immense too.
That’s always been the bet and remains so today.
But my advice is to make a plan and at least get off zero.
If the best time to get off zero was yesterday, the second best is today.
Personally, I use the Bitaroo exchange to buy Bitcoin.
The Blockstream Green wallet is a good option to store your Bitcoin safely.
And if you need a bit more hand-holding, the team at The Bitcoin Advisor will be happy to help get you started.
[Note: We have no affiliation with any of these companies.]
Of course, I also run a service called Crypto Capital if you ever want to dive deeper into the wider investing opportunity crypto is unleashing.
I’ve run this service in various formats since 2017 when Bitcoin was trading at just $3,000.
But amazingly, I think the opportunity right now is almost better — more assured certainly — than it was back then.
Anyway, that’s for you to think about.
All the best…
Good investing,
 |
Ryan Dinse,
Editor, Crypto Capital and Alpha Tech Trader
Comments