Institutional investors cut Bitcoin (BTC) allocations in US-based spot exchange-traded funds (ETFs) during the first quarter after hedging profits waned and futures premiums compressed

Despite a stellar first quarter for Bitcoin (BTC) price and the launch of U.S.-based spot price exchange-traded funds (ETFs), institutional investors pulled back from their allocations, according to a June 5 report by CoinShares.

As 13-F filings showed, asset managers with at least $100 million in assets under management (AUM) reported $21.2 billion in exposure to Bitcoin ETFs as of March 31, down from $27.4 billion at last year’s fourth quarter.

This 23% reduction outpaced the 12% decline in the overall ETF market’s AUM and came as Bitcoin fell 11% over the period.

CoinShares linked most of the decrease to hedge funds, which slashed their holdings by nearly 33% as the appeal of the basis trade diminished. The strategy involved capitalizing on wide spreads between futures and spot prices, largely used throughout 2024.

In contrast, advisors increased their exposure. Dollar-denominated stakes decreased in value, but Bitcoin-denominated positions rose, enabling advisors to account for 50% of all filer assets.

Meanwhile, hedge funds slipped to 32%, and brokerages held 10%. Advisors also dominated in terms of numbers, forming 81% of the 755 managers who disclosed Bitcoin ETF trades.

Despite selling, professional investors still held nearly 23% of Bitcoin ETF assets, a slight decrease from the 26.3% share reported in the previous quarter.

CoinShares described this decline as tactical rather than structural, highlighting that average portfolio allocations remain low, at less than 1%. The firm anticipates larger institutions to build positions once regulatory guidance stabilizes, internal committees approve crypto mandates, and the knowledge gap closes.

The report also highlighted the high concentration of institutional ownership within three products.

As of March 31, iShares Bitcoin Trust (IBIT) by BlackRock drew $12.7 billion from professional investors, or almost 33% of the ETF’s assets. It was followed by Fidelity’s FBTC with $3.6 billion and Grayscale’s converted GBTC at $2.2 billion. Together, the trio accounted for 85% of institutional capital.

First quarter flows reflected that hierarchy.

Among new entrants, Goldman Sachs and Macquarie opened or expanded positions in iShares, valued at $206 million and $136 million, respectively.

Among those reducing exposure, hedge fund heavyweight Millennium Management slashed his stake by $980 million, and Bridgewater-style advisor Bracebridge Capital liquidated $335 million.

On the selling side, Wisconsin’s state pension fund sold its entire $323 million holding, while Abu Dhabi’s Mubadala sovereign fund increased his position to $411 million.

Smith downgraded shares of Coinbase (NASDAQ:) to "Neutral" from "Buy" and lowered the price target to $70 from $100. The analyst noted that while Coinbase is well-positioned to benefit from the growth of the digital asset class, recent weakness in crypto trading activity has impacted the company's revenue generation.

Smith anticipates a slowdown in revenue growth in the second quarter and sees further weakness in the third quarter. As a result, he expects Coinbase to miss earnings estimates for the second quarter and possibly the third quarter as well.

While Smith acknowledges that Coinbase is a best-in-class cryptocurrency exchange with a strong brand and a large customer base, he believes that the stock is fully valued at current levels, considering the revenue headwinds and the competitive landscape.

Coinbase is a leading cryptocurrency exchange platform in the U.S., offering a wide range of digital assets, trading services, and institutional products. The company went public in 2021 through a direct listing and has become a key player in the rapidly evolving crypto industry.

Coinbase stock has been volatile in 2024, trading at a lower range than in 2022. The stock is down about 30% year-to-date and recently fell sharply after Coinbase reported disappointing first-quarter earnings and revenue.

Earlier this month, two analysts at Wolfe Research downgraded shares of Coinbase to “Peer Perform” from “Outperform,” noting that the stock’s valuation no longer reflects the company’s potential in a bear case scenario.

Despite the recent sell-off, some analysts remain bullish on Coinbase in the long term, considering its strong market position, diversified product offerings, and potential for growth in new markets.

Coinbase is set to report second-quarter earnings on July 25, and investors will be closely monitoring the company’s revenue and earnings performance, as well as its outlook for the second half of 2024.

News data source: kdj.com

The above is the detailed content of Institutional Investors Cut Bitcoin (BTC) Allocations in US-Based Spot ETFs During the First Quarter: Report. For more information, please follow other related articles on the PHP Chinese website!