Institutional investors generate the most demand for Bitcoin exposure through ETF

Bitcoin ETFs are drawing in a selection of institutional investors clearly skewed toward experts and institutions. Investment advisors are the top class of holders, based on filings data. 

Bitcoin ETF ownership skews heavily toward institutions and professional investors. Advisors are the biggest class of ETF buyers, with the largest exposure to BTC holdings. 

Eric Balchunas, senior ETF analyst at Bloomberg, pointed to ETF as the real marker for institutional interest in BTC. The 13F form filers hold 20% of all BTC in the fund portfolios, expecting to expand their holdings with increased demand from partner institutions. 

The 13F filings present the asset data of institutional investment managers, who are obliged to disclose their portfolios to the US Securities and Exchange Commission. The growing demand shows BTC may be used as a hedge against uncertainty and a bid with an unlimited upside, with the potential of storing value for funds or family estates. 

The inflow of institutions confirms previous narratives that large-scale buyers are shaking down the weak hands of retail, causing a transfer of wealth from BTC native investors to TradFi institutions. Insider whale and mid-range wallet accumulation also continues, leading to the consolidation of BTC holdings. A total of 3.39M of all BTC is held in some form of long-term reserves.

Bitcoin ETF shows a predominance of buying, with more days in the green. BlackRock remains the biggest holder of BTC reserves, adding to the scarcity of available coins. | Source: Coinglass

In total, Bitcoin ETFs carry 1,380,355 BTC and are still the largest category of buyers. Outside of professional investment managers with reporting duties, some ETFs are also suitable for retail investors. Initially, Grayscale’s products traded as OTC shares, offering exposure to small-scale buyers with organic demand. 

A clearer regulation framework and improved storage solutions are also boosting institutional demand. ETF buyers are also more confident while watching the trend of building BTC corporate treasuries. 

Institutional investors add to the BTC supply crunch

The scale of institutional investors is also adding to the supply crunch for BTC. Retail investors have retained a smaller share of coins held in self-custodied wallets. 

At the higher BTC price, institutions still demand much more BTC for storage and reserves, further depleting OTC desks and exchange reserves. According to Sygnum Bank, the sliding BTC supply will remain one of the strong factors for a rush to secure as much BTC as possible. 

The latest monthly investment outlook report by Sygnum Bank notes a significant decline in the liquid supply of BTC. Institutional adoption is one of the factors, adding to the BTC narrative as a hard currency and emergency reserve. Institutions may start to compete with nation-states and local governments in building their BTC portfolios. 

Proposals for BTC reserves have come from US states, as well as potential government wallets. Large-scale holders, China and the UK are already seeing proposals to transform their reserves of confiscated BTC into national wallets with a long-term outlook.

Sygnum Bank noted that the BTC supply on exchanges is declining mostly due to large-scale buying from corporate entities, funds, and other institutions. Previously, exchange balances mostly depended on whales and crypto natives. Currently, some of the corporate buyers seek to acquire BTC on the open market, competing with potential retail buyers. 

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