The most recent report from cryptocurrency exchange Coinbase indicates a significant increase in the stakes of spot Bitcoin exchange-traded funds (ETFs) by investment advisors during the second quarter of 2024. In contrast, holdings by hedge funds have experienced a slight decline.

According to Coinbase, the proportion of institutional holders classified as “investment advisors” increased by 3% in the second quarter, now representing 9% of total institutional investment. These findings were based on firms managing assets exceeding $100 million, which are required to file the US Securities and Exchange Commission’s (SEC) 13-F form.

Coinbase also highlighted the recent authorization by Morgan Stanley for its 15,000 financial advisors to begin recommending spot Bitcoin ETFs to high-net-worth clients, indicating a growing interest in Bitcoin investment among the advisor community.

However, Coinbase also noted that the onset of the summer period in the US (June-August) may result in delayed large inflows, as financial advisors may find it challenging to attract new clients during this time. Additionally, they pointed out that market activity during the summer months can be volatile, with Bitcoin’s price declining by 9.86% since July 18, trading at $59,132 at the time of publication.

On the other hand, the decline in hedge fund managers’ holdings of Bitcoin is likely attributed to their exploitation of the price variance between spot Bitcoin ETFs and Bitcoin futures contracts, a strategy known as “trading the basis.”

Coinbase highlighted that Chicago Mercantile Exchange (CME) Bitcoin futures contracts witnessed a 15% growth during the second quarter of 2024, reaching a total value of $2.75 billion. This upward trend in futures trading activity suggests an ongoing interest in Bitcoin investment within the institutional space.

Furthermore, Coinbase mentioned that the overall ETF complex attracted $2.4 billion in net inflows from institutional investors during the second quarter. The exchange views this as a positive development, especially in light of Bitcoin’s underperformance in the market during the same period.

Despite starting the second quarter near its all-time high of $71,333, Bitcoin’s price experienced a decline to $60,888 by June 30, marking a 14.6% decrease for the quarter, based on CoinMarketCap data. However, this did not discourage investment flow into spot Bitcoin ETFs, as total inflows since their launch on January 11 have reached $17.35 billion, according to data compiled by Farside.

In conclusion, while investment advisors have been increasing their exposure to spot Bitcoin ETFs, hedge funds have been adjusting their strategies to leverage the price differences between these ETFs and Bitcoin futures contracts. These findings from Coinbase offer valuable insights into the evolving investment landscape for Bitcoin and its related financial products, shedding light on the shifting preferences and tactics of institutional investors in the cryptocurrency market.

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