- June 4, 2024
- Posted by: [email protected]
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According to David Krause, an ex-finance professor from Marquette University, Wisconsin’s modest investment in Bitcoin ETFs could significantly expand. In a PBS interview, Krause explained that the state’s $160 million investment represents only an initial step. He described it as “just a toe in the water” and predicted that more substantial investments are likely to follow. “They are testing to see the reaction of the public to whether or not there’s resistance to owning this, and they’re using it as a trial run,” Krause stated.
Recently, major investment firms disclosed their securities portfolios through mandatory 13F filings with the SEC. This transparency allowed Bitcoin enthusiasts to identify the first major US institutions investing in Bitcoin through an ETF wrapper since Bitcoin spot ETFs launched on national securities exchanges in January. Among these investors was the State of Wisconsin Investment Board (SWIB), one of the country’s top ten pension funds, which purchased shares of BlackRock and Grayscale’s Bitcoin products. This move surprised many Bitcoin advocates, who did not expect pension fund allocations to begin so soon.
As of March 31, SWIB’s Bitcoin holdings accounted for just 0.4% of its $37.4 billion securities portfolio and 0.1% of its $155 billion in total assets. Krause noted that Bitcoin would need to constitute one to two percent of the portfolio to have a substantial impact. He emphasized that Bitcoin adds diversification to the state’s portfolio due to its limited correlation with stocks and bonds and its potential as an inflation hedge, given its limited supply.
Looking ahead, Krause anticipates that other states will follow Wisconsin’s lead. However, he cautioned that underfunded states might struggle to invest in Bitcoin due to its high short-term volatility and the need for liquidity. Despite these challenges, Krause believes the long-term trend for Bitcoin investments will be positive.
Supporting this viewpoint, Bitwise CIO Matt Hougan noted in a memo that many institutional investors start with small Bitcoin allocations, eventually increasing to one to five percent of their portfolios. For instance, HighTower Advisors allocated $68 million to Bitcoin ETFs last quarter, a mere 0.05% of their total portfolio. Hougan highlighted the potential for growth, suggesting that even a 1% allocation could amount to significant investments. “Multiply that by the growing number of professional investors participating in the space, and you can begin to see what’s behind my enthusiasm,” he concluded.
