DIGITAL ASSETS: THE ETF EXPOSÉ
Cryptocurrency prices have rallied strongly since late last week, as institutional investors revealed their holdings in digital assets, spot bitcoin exchange-traded funds (ETFs) recorded new inflows, and chances of An approval of spot Ethereum ETFs in the United States rose sharply.
The odds of an Ethereum ETF soared after companies filing late amended their filings and asset managers de-staking their prospectuses.
Two asset managers are awaiting a response from the US Securities and Exchange Commission (SEC) later this week, again putting a potential approval in the spotlight.
Benevolent macroeconomic numbers contributed to the rally as US inflation was in line with expectations.
We still see inflation continuing to decline, which would allow the US Federal Reserve to begin reducing interest rates later this year.
Cryptocurrency prices have rallied strongly since late last week as institutional investors revealed their holdings in digital assets, spot bitcoin exchange-traded funds (ETFs) recorded new inflows, and chances of a crypto approval US spot Ethereum ETFs rose sharply.
Investment managers in the US with assets under management greater than $100 million must comply with the SEC's regulatory framework, which requires them to disclose holdings on a quarterly basis through 13-F filings.
The filing period, which ended last week, allows for a better overview of the property's layout. The largest holders were hedge funds, market makers and wealth managers, and the total assets held with these investment managers represented between 16% and 35% of the total float of spot bitcoin ETFs.
Most notable, however, was the fact that pension funds appear to have become more fond of this asset class, with the Wisconsin State Investment Board allocating nearly 1% of its $146 billion in assets under management of spot bitcoin ETFs.
University endowments are still absent, although the hedge fund that manages a portion of the Yale and Princeton endowments had positive balance sheet exposure to the assets.
The remaining estimated 70% of U.S. spot bitcoin ETF holders remains difficult to measure, as regulations in other countries do not require companies to file 13-F forms.
In the UK, hedge funds are only required to report if exposure to a single instrument exceeds 3% of total assets under management.
On the other hand, spot bitcoin ETFs found some respite and have finally embarked on a six-day streak of continuous inflows, averaging around $200 million daily.
The odds of an Ethereum ETF soared when applicants amended their 19b-4 filings at the last minute, as requested by the SEC.
Typically, the form is released by the SEC and enters a public comment and review period, but with the short timeline, quick decisions may have to be made.
Asset managers' presentations for the products had recently removed staking clauses from the prospectuses. The market is now heavily tilted towards an approval. That said, VanEck and ARK expect a response by the end of the week, and Ethereum rose sharply on the news.
Additionally, benign macroeconomic numbers contributed to the rally as US inflation was in line with expectations. We still see inflation continuing to decline, which would allow the US Federal Reserve to begin reducing interest rates later this year, which should translate into a generally favorable backdrop for digital assets.
Manuel Villegas, Digital Asset Analyst, Julius Baer
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