Bitcoin ETF filings Q1 recap: 'Hot sauce’ investment adored by short-term traders, diverse investors

As the first-quarter 13F filings stopped trickling in this past week, the market had a comprehensive picture of some of the major players that had purchased spot bitcoin ETFs and exactly how much they were holding onto at the conclusion of the three-month period ending in March.

13F filings are quarterly reports from institutional investment managers with at least $100 million in equity assets under management. The filings detail the institutions' holdings.

What now seems apparent is that not only did a mixed bag of investors buy the newly-launched spot bitcoin ETFs issued by financial giants like Grayscale, BlackRock and Fidelity, most of the trading volume during the first quarter appears to have been fueled by short-term trades amid superior liquidity.

“At the end of the day, the amount we’ve had reported in 13Fs is a fraction of the total volume since launch,” Bloomberg ETF analyst Eric Balchunas told The Block.

On the last trading day of the first quarter (March 28), spot bitcoin ETFs had generated $182 billion in cumulative trading volume, according to The Block Data Dashboard . However, the 13F filings revealed that only a small portion of that volume likely came from institutions holding longer positions.

CoinShares Head of Research James Butterfill said the total known assets under management across all spot bitcoin ETFs, according to the 13F filings, was a mere $15.4 billion. That total also represents a limited amount of the $62.2 billion in total AUM for the eleven bitcoin exchange-traded funds available to investors.

Spot bitcoin AUM totals compared to what was reported in 13Fs. Image: CoinShares.

Comparing $182 billion in cumulative trading volume to the $15.4 billion of spot bitcoin ETF shares held at the end of the quarter suggests short-term trading accounted for most of the buying and selling activity during the period.

"Bigger investors love liquidity. They love to go in and out unnoticed," Balchunas said, adding that BlackRock's ETF (ticker symbol IBIT) achieved liquidity surprisingly fast and that likely part of its allure. "Once it gets very liquid ... it checks the all the boxes for a bigger investor," he said.

Although Grayscale’s ETF has remained the largest in terms of assets under management, the fund has shed billions of dollars since launch, while BlackRock’s fund has ballooned to more than $17 billion in AUM as of Friday, according to The Block Data Dashboard .

Morgan Stanley, hedge funds and Wisconsin

The fact that several hundred financial institutions, including heavyweights like Morgan Stanley , bought shares in ETFs that track the world’s most popular cryptocurrency (by market cap) was historic by many measures. But how varied those investors turned out to be was also impressive, according to Balchunas.

"The diversity of institutions is higher than I thought. I thought we would see almost all just advisors," he said. "A good chunk of the largest hedge funds in America are [also] in there."

One of the more interesting investors to report they owned shares in spot bitcoin ETFs included Bracebridge Capital , the hedge fund that manages the endowments of Yale University and Princeton University. Bracebridge Capital reported owning more than $400 million in spot bitcoin ETFs at the end of the first quarter.

Earlier this week, Matt Hougan, CIO at spot bitcoin ETF issuer Bitwise, found it noteworthy that Hightower Advisors, the No. 2 RIA firm in the U.S., owned $68 million in bitcoin ETF shares. Hougan called some financial institutions' positions a "down payment" on future exposure.

“Beginning about six months after the initial allocation, many firms begin allocating across their entire book of clients, with allocations ranging from 1-5% of the portfolio,” said Hougan in a note to clients.

Perhaps one of the most curious revelations was when the State of Wisconsin Investment Board reported it owned more than $160 million of the bitcoin-based funds. JP Morgan also surprised some when it reported owning shares in spot bitcoin ETFs, although the holdings revealed were minimal. Jamie Dimon, JPMorgan's CEO, has consistently been critical of bitcoin.

"While Europe has had access to spot-based bitcoin ETFs for the past three years, this has not been the case in the U.S. What we are now witnessing is the release of years of pent-up demand," said CoinShares's Butterfill. "There are over 1,900 owners of the U.S. [spot bitcoin] ETFs," he added.

Susquehanna International Group’s $1 billion holding of Grayscale ETF shares was the largest single position reported in this round of filings, according to Fintel data.

'Hot sauce'

Since launching in January, the bitcoin ETFs have generated tremendous trading volume when compared to other previously launched exchange-traded funds. Dozens of traditional financial institutions appear to have bought into the bitcoin craze, albeit in their own way.

But what’s ultimately fueling all the buying and selling?

"It’s hot sauce. For a 60/40 person (moderate investor who puts 60% in stocks and 40% in bonds), they wouldn’t sell out of Vanguard and buy IBIT, but they may dabble a little bit of this on their otherwise boring meal," said Balchunas. "Ten percent of their portfolio could be earmarked for this speculative hot sauce."

But the excitement around bitcoin and its potential upside isn’t enough to justify what has so far transpired, added Balchunas, who admits there are plenty of other "hot sauce" style investments available to investors.

"What makes bitcoin interesting is there is this underlying story about hedging the devaluation of the dollar," he said. "To me, bitcoin is like gold, but as a teenager."

When asked if he owns any crypto or shares in spot bitcoin ETFs, Balchunas said he owns a "simple" 401k.

　　Disclaimer: Includes third-party opinions. No financial advice. See Risk Warning.