Bitcoin Exchange-Traded Funds (ETFs) have exploded in popularity, and the next big surge could be even bigger. A Bloomberg Intelligence analyst predicts that major financial institutions, like UBS, Morgan Stanley, and Merrill Lynch, are poised to significantly boost adoption.
Record-Breaking Success
Spot Bitcoin ETFs have seen incredible growth since launching in 2024, outpacing even the growth of gold ETFs decades ago. BlackRock’s IBIT, the most popular Bitcoin ETF, hit $50 billion in assets incredibly fast – much faster than any ETF before it. Total inflows for Bitcoin ETFs peaked at over $40 billion in less than a year, with assets still exceeding $100 billion. While other Bitcoin ETFs exist, IBIT dominates in terms of trading volume and liquidity.
Institutional Investors Jump In
Around 25% of ETF holdings are from institutional investors, with hedge funds being the biggest players. Many hedge funds are using a “basis trade” strategy – buying Bitcoin ETFs while simultaneously shorting Bitcoin futures contracts to profit from price differences. This strategy is considered relatively low-risk and doesn’t significantly impact Bitcoin’s price.
Wirehouses: The Untapped Potential
The real game-changer, according to the analyst, is the major wirehouses. These firms manage the portfolios of extremely wealthy individuals and currently allow Bitcoin ETF purchases but don’t actively recommend them. Once they start actively recommending Bitcoin ETFs as part of a typical portfolio (e.g., 2-5%), the market could see a massive influx of capital. This could be even bigger than the initial boom in 2024.
The Future of Bitcoin ETFs
The analyst believes that the next major wave of Bitcoin ETF adoption will come from wirehouses officially endorsing and recommending them. With trillions of dollars under their management, their support could propel Bitcoin ETFs to unprecedented heights. The analyst concludes that the first year of Bitcoin ETFs was already unbelievable, exceeding even their optimistic projections.
