Bitcoin ETFs breaking records, gaining unprecedented institutional traction

Bitcoin ETFs are breaking records as the fastest-growing ETFs in history and are quickly gaining the attention of institutional investors.

Contrary to popular belief that retail investors are behind the rise in Bitcoin (BTC) ETF adoption, data suggests that institutions are contributing significantly to the trend, according to Bitwise CIO Matt Hougan.

Since their launch in January, Bitcoin ETFs have reached $17.5 billion in net flows, beating previous records held by other ETFs.

For context on this sentiment, the previous record holder, the Nasdaq-100 QQQs, made nearly $5 billion in their first year. Bitcoin ETFs are on track to outperform that benchmark by a wide margin.

Despite a 13% drop in total assets under management in the latest quarter due to the decline in Bitcoin prices, institutional ownership in U.S. spot Bitcoin ETFs rose to 24% from 21.4% in the first quarter.

Notable new institutional investors included Goldman Sachs and Morgan Stanley, contributing a significant $2.4 billion in inflows during the quarter. Investment advisors increased their share of total assets, while hedge fund assets decreased.

Bitcoin ETF Critics

Despite the phenomenal growth, critics remain unconvinced, Hougan says. Critics argue that retail investors are largely driving Bitcoin ETFs without institutional backing. 13F filings show that as of Q2 2024, institutions held just 21% of Bitcoin ETF assets, with retail investors holding the remaining 79%.

But Hougan argues that numbers don’t tell the whole story. By analyzing the 10 fastest-growing ETFs in history, he highlights that Bitcoin ETFs have reached unprecedented levels of institutional adoption in terms of number of institutional holders and total institutional assets under management.

The only ETF that comes close to comparing is the Nasdaq-100 QQQs, but even that comparison is skewed due to differences in the availability of historical data, the Bitwise CIO noted.

While the increase in retail interest is undeniable, institutional investors are also clearly recognizing the value of Bitcoin ETFs, contributing to their record-breaking growth.

What is a spot crypto ETF?

A spot crypto ETF tracks the price of a specific crypto and invests portfolio funds in that crypto. These funds trade on public exchanges but typically track a specific crypto. Like similar funds, crypto ETFs are on regular exchanges and investors can hold them in standard brokerage accounts.

“ETFs are great because they can be held by both institutions and retail investors,” Hougan wrote on X. “But don’t let the historical adoption of bitcoin ETFs by retail investors fool you. They’re also gaining institutional interest faster than any other ETF in history.”