Spot exchange-traded funds, which introduce Bitcoin to the broader financial system, are inciting an initial surge in demand from investors.
The ongoing discourse surrounding institutional investment in Bitcoin and cryptocurrencies includes reports that in 2023, Peter Thiel’s Founders Fund allocated an additional $200 million to BTC and Ether.
Thiel’s firm invested $100 million in Bitcoin BTC, according to a Reuters report citing sources with direct knowledge of the venture capital (VC) fund’s cryptocurrency investment move.
In 2023, speculation regarding the imminent approval of a spot Bitcoin exchange-traded fund (ETF) intensified in the United States. Founders Fund has an extensive track record of investing in Bitcoin, as Reuters reported when the firm acquired BTC in 2014.
Major financial institutions and funds have been unable to purchase Bitcoin directly on the open market. In contrast, venture capitalists and hedge funds such as Founders Fund have been able to do so since the introduction of spot Bitcoin ETFs.
Bitcoin Surpasses $50,000, While ETF Inflows Total $2.8 Billion
On February 12, the value of Bitcoin surpassed $50,000, a level it had yet to be transacted at since December 2021. In recent weeks, market analysts and industry commentators have emphasized the effect that Bitcoin ETFs have had on the escalating value of BTC.
Early February saw more than $1.1 billion in inflows into Spot Bitcoin ETFs as outflows from the Grayscale Bitcoin Trust continued decelerating. Since they began trading on January 11, Bitcoin ETFs have received $2.8 billion in capital inflows, according to a report by CoinShares dated February 12.
Bitcoin ETFs Have More Bitcoin Than MicroStrategy
Bitcoin ETFs, excluding Grayscale’s GBTC, contain more than 192,000 BTC, according to Bitfinex analysts. As a result, the total assets under management have risen to $59 billion, the highest level since early 2022.
According to the most recent Bitfinex Alpha report, the combined holdings of MicroStrategy and Bitcoin ETFs account for 1.8% of the total Bitcoin supply that will ever exist. Although the BTC held is of considerable value, this does not indicate that the holdings “no significant threat to the decentralized nature of the Bitcoin network.”
#Bitcoin is the world’s most popular investment asset. It is novel, digital, global, unique, and uncorrelated to traditional risk assets. That makes it a natural addition to the portfolio of a responsible investor. pic.twitter.com/ZOEVkKDh0T
— Michael Saylor⚡️ (@saylor) February 12, 2024On February 13, CNBC interviewed MicroStrategy founder Michael Saylor, who led the software company’s initiative to convert its treasury holdings to Bitcoin in 2020. Saylor stated that Bitcoin is progressively gaining appeal as an investment portfolio asset.
“Bitcoin is the world’s most popular investment asset. It is novel, digital, global, unique and uncorrelated to traditional risk assets. That makes it a natural addition to the portfolio of a responsible investor.”.
Institutional investors have “10 years of pent-up demand” for Bitcoin, according to Saylor, and can now acquire exposure to the digital asset through Bitcoin ETFs in the United States. A rebalancing, which he perceived as investors transferring capital between futures markets, miners, MicroStrategy, and ETFs, was emphasized.
Saylor elaborated, “Following that, I think the asset has found its footing, and people are beginning to realize that there’s 10 times as much demand for BTC coming in through these ETFs as there is supply coming from the natural sellers, which are miners,”
As Bitcoin surpassed $50,000 for the first price in over two years, market analysts also noted tumultuous shifts in macroeconomic factors. Bitcoin ETF approval in the United States and the halving of Bitcoin are significant focal points, according to eToro market analyst Josh Gilbert.