Crypto

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

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

By Max Weldon

5/16, 12:57 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 by end of Q1, with hedge funds and investment advisers leading the charge.
  • Despite traditional risk aversion, pensions like Wisconsin's show a slowly building wave of demand for digital asset investments.

Wisconsin's Bold Bitcoin Bet

The state of Wisconsin's pension fund made headlines with its substantial $160 million investment in bitcoin ETFs offered by BlackRock and Grayscale, marking a significant moment in the acceptance of cryptocurrencies by traditionally conservative investors. This move is particularly notable given pensions' general aversion to high-risk investments and their slow pace in adopting new asset classes. Bloomberg Intelligence senior ETF analyst Eric Balchunas highlighted the rapid adoption of bitcoin ETFs by institutional investors, including pensions, as a positive sign for the cryptocurrency market. This development suggests a growing confidence among large, professional investors in the liquidity and structure of bitcoin ETFs.

Institutional Embrace of Bitcoin ETFs

The first quarter of the year saw an impressive number of over 500 institutional investors holding spot bitcoin ETFs, far exceeding the average for newly launched ETFs. This diverse group of investors included private equity firms, insurance companies, brokerage accounts, with investment advisors and hedge funds comprising the largest portions. The broad spectrum of institutions investing in bitcoin ETFs so early indicates a robust interest in cryptocurrency as an asset class. Millennium Management emerged as the biggest institutional buyer, allocating about 3% of its total assets to various funds, predominantly to BlackRock's IBIT. However, it's crucial to recognize that not all these investments may be long-term or directly betting on bitcoin's price increase, as some could be related to trading firms' market-making activities.

Pensions and Crypto: A Gradual Shift

The investment by Wisconsin's pension fund into bitcoin ETFs signals a changing perception of cryptocurrencies among the most risk-averse investors. Pensions are mandated by law to minimize the risk of large losses, which traditionally would not align with the volatile nature of digital assets. Yet, the introduction of bitcoin ETFs, which trade like regular stocks and minimize administrative concerns 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 slow but steady 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 digital assets investments by pension plans):

    "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..."