🔍Deep Dive: Bitcoin ETFs - Dissecting Institutional Capital Flows

Spot Bitcoin ETF inflows have been an overwhelming success since their launch in early January. Raking in a whopping $11 billion in total purchases, they’re officially the most popular ETF launch in history.

Given this incredible success, the real question is, who are the buyers behind these staggering ETF flows? Are the retail or institutional investors? Where are they located? Are they long or short Bitcoin?

In this report, we take a deep dive into the 13F filings of institutional investors who recently declared holding Bitcoin ETFs, gleaning insights into the purchases made by some of the largest financial firms in the world. Lets dig in!

Table of Contents

1. Section 1: Understanding the 13F Filings

2. Section 2: The Big Picture

3. Section 3: Bitcoin ETF Whales - Who Owns the Most?

4. Section 4: The Prettiest Girl at the Dance

5. Section 5: Are They Secretly Short?

6. Key Findings

Estimated Read Time: 1.1 Blocks (~11 Mins)

Section 1: Understanding the 13F Filings

Form 13F filings are quarterly reports required by the U.S. Securities and Exchange Commission (SEC) for large institutional investment managers. These filings provide a detailed account of the securities held by major institutional investors. See below for the TLDR:

Who Needs to Submit the Filings?

These are required to be submitted by all institutional investors who manage manage +$100M in assets. This includes firms such as:

• Hedge funds

• Mutual funds

• Pension funds (established by companies, unions, or government entities)

• Insurance companies, and

• Other entities (investment advisers who manage client portfolios on a discretionary basis).

What Data is Included in these Filings?

The form includes details about equity securities, including stocks traded on U.S. exchanges, certain equity options, and warrants. For each item, the number of shares owned and the fair market value of the securities are reported.

When Are They Filed?

The form must be filed within 45 days after the end of each calendar quarter via the SEC’s EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system. The deadlines are typically:

• For Q1 (ending March 31): May 15

• For Q2 (ending June 30): August 14

• For Q3 (September 30): November 14

• For Q4 (ending December 31): February 14 of the following year

As you can see above, the Q1 deadline, May 15, just passed, and all large institutional investors that own Bitcoin spot ETFs have recently disclosed their holdings to the general public.

Data Collection Methodology

We have aggregated all 13F filings for Q1 that mention any of the 11 US spot Bitcoin ETFs from the EDGAR database to get a sneak peek of how larger institutional investors are behaving.

Note that firms file their reports on different dates - some even filing after the deadline (see chart below). Thus, some variation exists between analysts depending on precisely when they collect their data.

Section 2: The Big Picture

Bitcoin Outshines Gold

The dataset includes 942 entities reporting on 213M shares of the 11 Bitcoin ETFs worth $10.954B, an average of about $12M per firm.

Below, we show the overall statistics based on each ETF ticker. Unsurprisingly, the largest reported holdings (red box below) belong to:

1. Grayscale’s $GBTC ($4B+)

2. Blackrock’s $IBIT ($3B+)

3. Fidelity’s $FBTC ($2.2B+)

4. Ark’s $ARKB ($980M+)

5. Bitwise $BITB ($360M+)

Typically, new ETFs attract only a few institutions in their initial months post listing. For comparison, the gold ETF launch, which was hailed as the most successful ETF launch ever, only attracted 95 professional firms in its first quarter. Bitcoin almost 10x’d this with its total of 942 institutional investors.

Retail is Dominant

The ~$11B invested by these larger firms is approximately 20% of the total US spot Bitcoin ETF assets, with the remaining 80% owned by “retail” investors. This is inline with our expectation, given the relative slow speed at which institutions typically move (although their volumes are sufficiently larger when they decide to ‘take the plunge’).

A Diversified Ownership Base

We also used our data to create a geographical representation of ETF holders based on the entities' primary HQ location. The results show a diversified set of ETF purchasers, with notable standouts in New York and Pennsylvania who took the top spots (dark blue shading below). This is followed by Massachusetts in third, Connecticut in fourth and California in fifth.

This data confirms the observation from of Matt Hougan, Bitwise CIO, who stated that “Everyone, Everywhere, All At Once, [bought the ETFs]” in an interview with CNBC shortly after launch.

The 3-Step ETF Playbook

As Hougan notes, most investors do not take large Bitcoin positions all at once; rather, they take a gradual approach, following a familiar pattern:

Step 1 - Due Diligence

First, they spend 6-12 months doing thorough due diligence, with many of the professionals at the firm potentially making a small personal investment to better “get a feel” for how the asset behaves. Only once they’re comfortable with the risk and better appreciate Bitcoin’s volatility will they even consider allocating client funds.

Step 2 - Early Allocation

Next, they typically allocate on behalf of select clients who have shown high interest (see example below of precisely such an example from Wiser, giving Bitcoin ETF access to “select client portfolios”).

“Wiser manages the savings of over 400 families. This is the way that many will end up being able to participate in bitcoin: through the person they trust to manage their money.” – Hunter Horsely, Bitwise CEO, writes in an X post.

Step 3 - Broader Allocation

About six months later, most firms start allocating across their entire client base, typically starting with anywhere from 1-5% of their clients’ overall portfolios.

Section 3: Bitcoin ETF Whales - Who Owns the Most?

So which firms are behind the curtain acquiring positions in all these Bitcoin ETFs? The figure below provides a visual overview of the largest ETF holders by total holdings.

As is evident, Millenium, Susquehanna, and Horizon Kinetics all lead the pack, with Jane Street and Schonfield Strategic (who are also market makers and liquidity providers) rounding out the top 5.

Dissecting The Largest Bitcoin ETF Holders

We now take a deeper look into the top 6 Bitcoin ETF holders to see what we’re able to uncover. These include Millenium, Horizon Kinetics, Schonfeld Strategic, Boothbay Fund, Morgan Stanley and the State of Wisconsin.

Rank #1 - Millennium Management

Millennium Management is a global multi-strategy hedge fund founded in 1989 by Israel Englander. It is one of the largest and most successful hedge funds in the world, and it utilizes multiple trading strategies across various asset classes and markets. Its AUM is over $101B, and it has more than 5,600 employees. 

Millennium Management has shown interest in digital assets and had previously invested in Bitcoin futures and other crypto products. They hold almost $2B of spot Bitcoin ETF products, which equates to a 1.65% total portfolio allocation. (Some reports have listed their AUM as $64B, which makes the Bitcoin allocation 3%, but we observe $101B of holdings in their latest 13F filing).

Below you can find their largest holdings, which show they currently own more Bitcoin than they do Netflix stock! Other holdings that are smaller than their Bitcoin position include Salesforce, Boing and Wells Fargo.

Rank #2 - Horizon Kinetics

Horizon Kinetics is a private investment advisory firm that provides portfolio management and consulting services to individuals, high-net-worth individuals, trusts, and estates. Horizon Kinetics just celebrated its 30th anniversary and intends to go public this year. According to recent reports, it manages approximately $6.2B in assets.

Interestingly, the firm’s investment philosophy is long-term and low time-preference. On their website, they explain that they are not focused on short-term volatility, stating:

“We measure risk as an impairment of capital. Temporary price variability – ‘quotational’ risk – is not synonymous with capital risk. Returns can be increased by extension of the investment horizon rather than by extension of risk.”

The firm has been interested in Bitcoin for several years, with their co-founder Murray Stahl touting Bitcoin as a scarce digital asset with a predictable supply that offers an alternative to fiat currencies.

In a 2022 blog post, he questioned the role of bonds in a traditional portfolio and brought up Bitcoin, mentioning that:

“Bitcoin, on the other hand [compared to bonds], is considered by most to be very risky—understandable, considering its early stage of adoption and significant volatility.

Yet, if a holder of $1 million of the iShares Core U.S. Aggregate Bond ETF were to have made the most marginal possible change to the asset allocation plan by investing merely 1 basis point annually into bitcoin, the 12-year annualized-tax return would have risen from 1.79%, for a $1.237 million value, to at least $39.8 million, a 36% annualized return.”

They now own nearly $1B of Bitcoin ETFs, a 15.5% total portfolio allocation!

When analyzing their largest holdings, we notice their Bitcoin ETF position (in $GBTC alone) is the 2^nd largest position in their portfolio behind only Texas Pacific Land Corp, an Oil and Gas thematic investment. As such, their Bitcoin ETF position is larger than their allocation to a variety of other ‘hard asset’ stocks such as Franco Nevada (Gold), Wheaton Precious Metals (Gold/Silver), and Cheniere Energy Inc (Oil & Gas).

Rank #3 - Schonfeld Strategic Advisors

Schonfeld Strategic Advisors is a private multi-manager platform hedge fund that employs various trading strategies across global markets. Established in 1988, Schonfeld focuses on quantitative and fundamental investment approaches.

They, too, have a long-term focus and offer fundamentals-driven strategies while also managing tactical funds. Interestingly, one of their key company principles is patience. On their website, they write:

“Patience is at the core of how we approach all investment decisions. It allows us to take a long-term view to capital appreciation and enables Portfolio Managers to manage risk and operate their businesses most effectively.”

Schonfeld manages approximately $13.2B in assets and hires around 1,000 employees. They reported owning $480M worth of Bitcoin, which represents a 3.6% total portfolio allocation.

Below you can find Schonfeld’s portfolio breakdown. Their Bitcoin position is larger than Amazon. Their combined investments in IBIT and FBTC (which is $480M) are also vastly larger (6.6X) than their NVIDIA position (which is $72M). Their Bitcoin position is also larger than their total AI-themed investments (e.g., NVIDIA, Micron, TSMC).

Rank #4 - Boothbay Fund Management

Boothbay Fund Management is a multi-strategy hedge fund manager founded by Ari Glass in 2011. The firm invests in a broad set of areas, including equities, fixed income, and credit. Boothbay is more of a flexible and opportunistic player than a long-term investor, seeking to capitalize on market dislocations and inefficiencies. They have been active in crypto arbitrage for several years now.

In their 13F filing, we observe $5.5B worth of assets, including $377M of Bitcoin ETFs, a 7% allocation relative to their total portfolio size.

Below, you can find the portfolio allocation of Boothbay. They have a substantial Bitcoin position. Only their holdings of Blackrock’s IBIT is larger than their holdings of NVIDIA (or Amazon, or Alphabet).

They hold four Bitcoin ETFs (IBIT, FBTC, GBTC, and BITB) as well as a large position in Microstrategy. The combined Bitcoin ETF and Microstrategy bucket is $466M, and is their second-largest position only behind SPDR S&P500 ETF.

Rank #5 - Morgan Stanley

Morgan Stanley is a leading global financial services firm that provides investment banking, securities, wealth management, and investment management services. Founded in 1935, the firm serves corporations, governments, institutions, and individuals. According to recent reports, Morgan Stanley manages approximately $1.25 trillion in assets under management and employs over 70,000 people worldwide. 

Morgan Stanley has been involved with Bitcoin by offering its wealth management clients access to Bitcoin funds. In 2021, it allowed its wealth management clients access to three Bitcoin funds, marking a major step for the organization. But given their size, they are moving gradually. Their CEO, James Gorman, recently made cautiously optimistic remarks: “Bitcoin is not going away. It’s not a fad. I just don’t think it’s a core investment. I think it’s a speculative asset of which there are plenty of choices.”​

They now hold $272M worth of Bitcoin ETFs, which is small compared to the company's AUM but matches its cautious stance.

Morgan Stanley’s largest holdings are provided below. Besides broad S&P500 positions, they have large positions in Big Tech, and AI, and financial institutions.

Rank #6 - State of Wisconsin Investment Board (SWIB)

The State of Wisconsin Investment Board (SWIB) is a public pension fund responsible for managing the assets of the Wisconsin Retirement System (WRS) and several other state trust funds established in 1951. SWIB manages equities, fixed income, and alternative assets. 

According to recent reports, SWIB oversees approximately $156B in assets and reports owning $163M worth of Bitcoin ETFs. For a pension fund, it is a good start.

Their recent 13F filings indicate that their investment (non-cash) portfolio is valued at $37B, which makes their Bitcoin allocation 0.43% of the investment portfolio, as shown below.

Similar to most public pension funds, SWIB owns a diversified equities portfolio, with a bias towards ‘Big Tech’, including large positions in Microsoft, Alphabet, Apple and of course, Nvidia. Unsurprisingly, their initial Bitcoin allocation is small relative to their broader portfolio, although its $163M Bitcoin investment is still broadly comparable to many of its other holdings such as Nike ($210M), Fox ($182M) and Home Depot ($210M).

Section 4: The Prettiest Girl at the Dance

In this section, we analyze all the ETFs to determine which Bitcoin ETF’s are most favored by investors (i.e. who’s the prettiest girl at the dance). The chart below paints an interesting picture, with 3 primary observations:

#1 GBTC - The Most “Popular”

With 623 firms invested in Grayscale’s Bitcoin ETF, it remains the largest and most popular ETF by pure number of investors. This is despite its 1.5% annual management fee which is 6x higher than some of its nearest direct competitors (Blackrock and Fideility).

Note that Grayscale are launching a “Mini Trust” under the ticker “BTC” that will offer a 0.15% management fee which is closer to market rate. However only 10% of GBTC’s assets will be moved to this new, more attractive structure. They also have various other digital asset funds which still charge exorbitant fees (up to 2.5%) demonstrating their continued willingness to charge inflated fees to traditional investors.

#2 BITB - The Most “Diversified”

As is evident from the yellow bar chart above, BITB has the lowest average $ per institutional investor out of the top 5 ETF’s. This shows that their userbase is the most diversified, with each investor owning an average of $4M.

This is in stark contrast with ARK’s ARKB which seems substantially more concentrated with more than 3X Bitwise’s investors on average ($13M vs. $4M).

#3 Management Fees - A Race to the Bottom

But what determines the success of a specific ETF. Is it due to the structure of the ETF’s management fees, or is it relationship driven (which is often the case in the traditional ETF environment).

Since competing ETF’s came to market, Grayscale has already lost more than half of its AUM most likely due to their high fee structure. Blackrock on the other hand, has a higher AUM and a higher total number of investors despite charging a 0.12% management fee. This suggests that its brand, marketing, and relationships are likely more influential to its popularity than its fee structure.

One additional consideration which muddy the waters further on attempting to draw definitive conclusions would be switching costs. These could be either monetary (early withdrawal penalties) or psychological in nature (“I trust Blackrock with the rest of my portfolio and 4/5 basis points isn’t sufficient incentive to move ETF providers).

As such, it remains difficult to say whether relationships or fees are more prominent a driver of an ETF’s ability to attract larger institutional flow. However, what is clear is that fees remain one of the largest differentiators for these different issuers, making it a likely race to the bottom. This is evident by the below chart which shows the major discounts Ark, Bitwise Fidelity and Blackrock are offering. Hopefully one day the 0.2% - 0.25% fees will eventually mirror those of more traditional ETF which offer all in expense ratios as low as only 4 basis points (0.04%).

Section 5: Are They Secretly Short?

Given the profit-maximization nature of institutional capital, one reasonable question to ask is whether these financial entities are acquiring Bitcoin for the long run, or whether they’re shorting Bitcoin. Recall that “short” positions would benefit investors when the price of a stock (or, in this case, an ETF) declines.

Reasons these firms (Millennium, Blackrock, or Jane Street) would employ short positions would be to hedge their long positions and benefit from a potential arbitrage opportunity without taking the risks of a directional bet on price.

For example, if Bitcoin’s price is slightly higher in the futures market, Jane Street may open a major short position in the futures and an equal size long position in the spot market. This way, they are not making a directional betting on the price and only benefit from the price difference across the two markets.

Short positions are typically found in the futures market and are not announced ahead of time given they put these firms (i.e. the ETF provider) in a precarious position and at risk of a short squeeze.

There is a way to tell if institutional capital is shorting these Bitcoin ETF’s. We do so by analyzing whether the flows are “long” or “neutral”. Long-only flows would correspond with an appreciation of the Bitcoin price, in comparison to “neutral” flows which would result in a flat Bitcoin price.

By analyzing the differences in Bitcoin ETF flows compared to spot price, we see a very strong correlation, suggesting that the ETF flows are largely new money.

Key Findings

The latest 13F filings show that 942 institutional institutions invested ~$11B into Bitcoin ETFs, equivalent to ~20% of total US spot Bitcoin ETF assets. Without a doubt, this was the most successful ETF launch in history, with the number of total buying entities ~10x that of gold when it first launched.

Several notable institutions are on the list, including Millennium Management, Horizon Kinetics, Schonfeld Strategic Advisors, Boothbay Fund Management, Morgan Stanley, and the State of Wisconsin Investment Board (“SWIB”).

Bitcoin as a percentage of these top 6’s broader portfolios differ substantially from Morgan Stanley (a 0.02% allocation) compared to Horizon Kinetics (a 14% allocation); regardless how big or small an allocation, these firms are all officially “off zero”.

The geographic diversification of these Bitcoin ETF investors remains tilted toward the northeast USA, with New York, Pennsylvania, Massachusetts and Connecticut in the top four spots.

Based on our statistical analysis, it also remains highly unlikely that these firms are shorting Bitcoin given the high correlation between flows and Bitcoin spot price.

Now that Bitcoin has entered institutional portfolios, we believe it is unlikely to leave given Bitcoin’s rapidly appreciating nature over time relative to other asset classes. Complemented by the increasing probability of further global monetary debasement over the long run, we believe Bitcoin will eventually become a part of every investor’s portfolio.