As of today, there are several Bitcoin financial products targeting institutional Wall Street investors, be it Bitcoin futures contracts offered by CME and Bakkt, or Over The Counter (OTC) trades, with the SEC already considering a host of ETF proposals as well. However, there is no way to accurately determine the participation levels of these institutional investors.
A recent Block-Fi report analyzed all institutional activity in the United States, checking funds that have exposure to cryptocurrencies. The report looked at ADV brochures for mentions of crypto-related terms like “Bitcoin,” “Ethereum,” “digital currency,” “crypto” and other similar terms.
The Block-Fi report
There are a total of 40,000 registered investment advisors in the US. Out of these, 10,500 manage private funds which include hedge funds, private equity funds, and venture funds totaling 60,000. However, out of these 60,000 private funds, exactly 201 of them have crypto-exposure, while 51 traditional funds have exposure to crypto as well.
The percentage of private funds with crypto-exposure comes to only 1.3%, which is not a significant portion. However, one must also note that institutional investors dismissed the idea of crypto-investments until 2018. Thus, even a small percentage of 1.3% is a significant number for an asset class which is relatively new.
These 201 private funds which have exposure to crypto include,
- Traditional hedge funds that invest in and/or trade around crypto
- Crypto-only funds that mostly raised money at the end of 2017 to invest directly into cryptocurrencies and Initial Coin Offerings (ICOs)
- Venture funds that invest in crypto companies (like BlockFi), with a portion of assets, sometimes invested directly into cryptocurrencies.
The report also highlighted that out of these 201 private fund managers, 18 of them who have directly invested in crypto have a total wealth of over $1 billion. These 18 Billionaire hedge fund managers have a total fund of $286 billion under management. Assuming even 1% of these funds are invested in crypto, $3-$5 billion of traditional funds are already moving into crypto.
Institutional investors had maintained a safe distance from the cryptocurrency world for a majority of its 10-year old existence. These Wall Street investors considered the new asset class as being highly risky and a bubble that might not last long. However, when the cryptospace survived the longest bear market in 2018, investors started paying attention. Since then, many Wall Street investors have shown interest in diversifying their investment portfoliow by investing a portion of their wealth in crypto.