We now know who has invested or is investing in Bitcoin ETFs. However, the way these products are used tells a very different story.
In recent weeks, a number of institutions filed so-called “13F” filings, which provide a look at the purchasers of spot bitcoin ETFs, which saw brisk demand following their launch in January, as well as the sizes of those positions.
Advisers and their clients are considering allocations anywhere from 1% to 10%, financial professionals told Blockworks — sometimes pairing bitcoin ETF holdings with exposure to crypto stocks, ETH and other assets.
Where could they be replaced? It depends.
According to a filing filed on April 25, Tennessee-based Fielder Capital owned roughly $23 millions worth of Bitwise Bitcoin ETFs combined (BITB and GBTC) at the end of March.
United Capital Management, headquartered in Kansas, held bitcoin ETFs worth approximately $35 million as of that date.
Some even invested more.
Wolverine Asset Management, Envestnet and Fidelity Wise origin Bitcoin Fund (FBTC) were each in control of about $54 and $42 millions respectively.
Hightower Advisors has disclosed that it owns BTCs worth $68,000,000.
The State of Wisconsin Investment Board also bought 2.4 Million shares of BlackRock iShares Bitcoin Trust IBIT and more than a Million shares of GBTC.
Ah, yes. Hedge fund Millennium Management owns more than 844 million dollars worth of IBIT stock.
Some smaller companies did return the requests for discussion of these positions. Now let’s get started.
Consider the size of your allocation
“Our view has been [that crypto] deserves to be part of a holistic portfolio,” Fielder Capital Chief Investment Officer Stephen Korn told Blockworks.
Korn and his members were accused of being terrorists “crypto skeptics” For a little while, before 2020 you’ll be more interested.
The company began to allocate capital from high-net worth and ultra-high net-worth clients into a private cryptocurrency fund managed by Galaxy Digital as well as GBTC which was at the time available to accredited investors over-the-counter.
Its most recent 13F disclosure — showing a nearly $15 million position in BITB — reflects a more recent switching out of GBTC into the significantly cheaper Bitwise fund for certain clients, Korn noted. Fielder Capital still has clients that are invested in GBTC. The firm’s filings show it held Grayscale ETFs worth $8 million.
Fielder Capital is a family-owned business that manages approximately $800,000,000 in assets and has a client base of 110 families.
You can also find out more about the following: “vast majority” Korn stated that many of his clients are crypto-exposed.
“When a new client has come on — unless they’re strongly opposed — we’ve taken that position generally between 1.5% to 2% toward overall crypto,” He clarified.
For clients nearing retirement, a crypto allocation could be as little as 1%. Other clients may see their crypto positions rise to 5% or more in their portfolios before a firm decides to take action. “trim it back,” Korn explained.
“We assume it can go to zero, and we want to make sure that if it goes to zero, it’s still appropriate from a client standpoint,” He said about crypto positions. “But we size all positions holistically on an overall portfolio basis.”
According to the Digital Assets Council of Financial Professionals, the allocation between 1% and 5% seems to be the most popular for Fielder Capital’s clients.
Eighty-seven percent of those who recommended an allocation in crypto suggested a place between one and five per cent.
Once allocations exceed 5% “the impact on maximum drawdowns began to increase rapidly,” A Bitwise Asset Management August report found that the average household spends about $2,000 per year on their home.
United Capital Management clients in Kansas may invest more than most firms with up to 10% allocations, says CEO Chaehn.
United Capital Management had approximately $22 Million worth of FBTC on March 31st, filings reveal. United Capital Management also owns shares worth $13 million of ProShares Bitcoin Strategy ETF.
Koehn is interested in Bitcoin for the past 15 years. He recalled exposure through GBTC back in 2013, when bitcoin stood at around $600.
“We pretty much bought and sold that like a stock,” Blockworks told him.
GBTC will eventually convert into an ETF by January. The fund would join nine other bitcoin spot funds.
Koehn traded client shares in GBTC and BITO just days before Grayscale ETF’s launch on January 11, fearing that the Securities and Exchange Commission may not approve the ETF.
United Capital Management, on the other hand, swapped a major part of its BITO-exposure for FBTC. It noted that Fidelity had made a good decision by deciding to hold its own Bitcoin.
Koehn estimated that his company holds around $50 million in assets. “Web3” The bitcoin ETF positions include the shares. United Capital Management’s assets, which total $530 million at the most, are equivalent to nearly 10%.
The CEO explained that the firm can include exposure to crypto in portfolios with labels between moderate and aggressive. Most of the $50 million in crypto positions are spread over 500 clients.
What is the role of Bitcoin ETFs in a portfolio?
Bitcoin has become known to many as a digital store of value — often likened to gold — that does not rely on institutions and exists outside of the fiat currency system.
“Even if you strip that away, as a portfolio asset it’s pretty amazing,” Matt Hougan, Bitwise’s Chief Investment Officer, said this during a recent panel discussion. “It has low correlations to other traditional assets, it’s liquid, it has high return potential.”
He added that BTC was similar to venture capital at an early stage or private equity without any liquidity restrictions.
“We’re definitely trying to capture growth,” Koehn spoke of the bitcoin ETFs held by his company. United Capital Management combines exposure to these funds with allocations of stocks to Coinbase, MicroStrategy, and bitcoin miners such as Marathon Digital and CleanSpark.
David Warshaw is the founder of The Wealth Plan. He said that while he liked the range of 1%-5% for crypto assets, the next question was which crypto assets should be included and what position would replace it.
Warshaw’s clients typically have a relatively small position to gold, he said — meaning he might instead choose to swap a portion of a client’s equity position to put toward crypto.
“But obviously if an adviser has a 10% gold allocation, it might make sense to take from that,” He clarified. “I think that might be the asset class that is most comparable.”
Long Island’s financial professional, who manages assets worth $65 million for about 125 households has chosen several spot bitcoin ETFs for his clientele.
Warshaw also uses Eaglebrook Advisors for clients who are interested in Ether. Arbor Digital offers a multicoin strategy for clients who wish to gain even more exposure in the crypto world.
Korn stated that Fielder Capital customers with crypto allocations remain invested in gold.
The Wealth Plan does not limit its crypto-interested customers to BTC. Clients’ crypto allocations are usually split between 75% and 25% bitcoins to ether.
Fielder Capital gains ether exposure via Fidelity, or the Grayscale Ethereum Trust — a product Grayscale is trying to convert to an ETF.
“We think about it as a small component of an overall portfolio that’s got a lot of potential upside in certain scenarios as governments potentially debase currency,” Korn said. “And then there’s the potential utility of some of the tokens, smart contracts…where we’ll see what happens.”
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