Crypto

Wisconsin Pension's $160M Bet on Bitcoin ETFs Signals Crypto Shift

Wisconsin's state pension invests $160 million in bitcoin ETFs, signaling growing institutional confidence in cryptocurrency.

By Max Weldon

5/16, 10:51 EDT
Bitcoin / U.S. dollar
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Key Takeaway

  • Wisconsin's pension fund invested $160 million in Bitcoin ETFs, signaling growing institutional interest in cryptocurrency.
  • Over 500 institutional investors held Bitcoin ETFs in Q1, with hedge funds and investment advisors making up the majority.
  • Despite Vanguard's resistance to spot Bitcoin ETFs, the market sees increasing comfort among pensions and institutions towards digital assets.

Wisconsin Pension Dives into Bitcoin ETFs

The revelation that Wisconsin's state pension fund invested approximately $160 million into bitcoin ETFs by BlackRock and Grayscale marks a significant milestone in the acceptance of cryptocurrencies by conservative investment entities. Traditionally, pensions are known for their cautious investment strategies, making this move into bitcoin ETFs particularly noteworthy. The investment not only underscores the growing interest in digital assets among institutional investors but also signals a potential shift in how pensions view the risk and opportunity presented by cryptocurrencies. Bloomberg Intelligence senior ETF analyst Eric Balchunas highlighted the unusual speed at which institutional investors, including pensions, have embraced bitcoin ETFs, suggesting a growing confidence in the liquidity and structure of these funds.

Institutional Adoption Grows

The first quarter of the year saw over 500 institutional investors holding spot bitcoin ETFs, a figure significantly higher than the average for newly launched ETFs. This diverse group of investors ranged from private equity firms and insurance companies to brokerage accounts, with investment advisors and hedge funds making up the largest portions. The broad spectrum of institutions investing in bitcoin ETFs so early in their availability is unprecedented and indicates a robust interest in cryptocurrency as an asset class. Hedge fund Millennium Management emerged as the biggest buyer, allocating about 3% of its total assets to various funds, predominantly IBIT. However, it's important to note that not all investments may be long-term or directly betting on bitcoin's price increase, as some positions could be related to trading firms' market-making activities.

Pensions and Crypto: A Slow but Steady Shift

The investment by Wisconsin's pension fund into bitcoin ETFs is a clear indicator of the changing perception of cryptocurrencies among the most risk-averse investors. Pensions, by their very nature, are required to minimize the risk of large losses, which traditionally would not align with the volatile nature of digital assets. Yet, the ease of investing in cryptocurrencies through ETFs, which mitigate some of the administrative burdens like custody, is making digital assets more accessible and appealing to conservative investors. Nate Geraci, president of the ETF Store, and Kyle DaCruz, head of digital assets at VanEck, both anticipate a gradual increase in pension funds investing in digital assets, driven by the structural and liquidity comfort provided by ETFs.

Street Views

  • Eric Balchunas, Bloomberg Intelligence (Bullish on bitcoin ETFs):

    "Wow, a state pension bought [BlackRock's bitcoin ETF] in the first quarter... Normally you don't get these big fish institutions [investing] for a year or so (when the ETF gets more liquidity). Good sign, expect more, as institutions tend to move in herds."

  • Nate Geraci, President of the ETF Store (Cautiously Optimistic on pensions investing in bitcoin ETFs):

    "Pensions typically have highly rigorous due diligence processes, which means it can take time when deciding to allocate to a new investment – particularly one in an emerging asset class... I expect to see more pensions follow suit, but it will be a slowly building wave of demand versus something that happens overnight."

  • Kyle DaCruz, Head of Digital Assets at VanEck (Optimistic on pension plans investing in digital assets):

    "My assumptions would be that it will certainly help pensions and institutions get comfortable sooner, though I anticipate it being a relatively small number to start."

  • Stephanie Vaughan, Chief Operating Officer at Seven Seas Capital (Bullish on institutional adoption of bitcoin):

    "Behind the scenes, I think a lot of investment committees at these bigger institutions are working through getting approvals for allocating funds to bitcoin. This sort of approval process doesn’t happen overnight... but it’s clearly happening. And yes, it is different this time. With the stamp of approval not only from the federal government but also massive firms like BlackRock and Fidelity..."