Bitcoin ETF: The Smartest Guys in the Room? Big Wall Street Firms Hold Bitcoin Bag
It’s not just amateurs who are affected by the Bitcoin ETF crash. The implosion catches big Wall Street firms and pros too.
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Goldman Sachs is the largest owner of the ProShares Bitcoin Strategy ETF (BITO) with 10.5 million shares. That’s from the last position size on Sept. 30, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence. Goldman Sachs actually increased its position by nearly 20% during the third quarter. And shares in the largest Bitcoin ETF, which invests in Bitcoin futures, lost two-thirds of their value this year.
Meanwhile, Morgan Stanley Investment Management and ARK Investment Management are the No. 2 and No. 3 largest holders of another popular Bitcoin fund, Grayscale Bitcoin Trust (GBTC) as of their latest filings on July 31 and September 30, respectively. Morgan Stanley owned 11.2 million shares and ARK Investment 6.5 million shares. Grayscale Bitcoin is down 74% this year.
“Now it seems the crypto world is struggling with a crisis of its own.” said Jack Ablin, strategist at Cresset Capital Management. “While it is too early to predict a widespread crypto cascade, this year’s events have broader implications for investors.”
How widespread and severe is the impact of falling Bitcoin prices?
Who Owns Bitcoin?
It’s a bad year to own Bitcoin. The price of Bitcoin fell 74% this year to less than $17,000, Coinbase says.
Bitcoin prices are collapsing this year amid a stock market bear market, rising dollar and economic weakness. And the financial implosion of Bitcoin exchange, FTX, also shook the entire cryptocurrency ETF ecosystem.
Questions remain about how widespread the pain of Bitcoin ownership is. Many large venture capital investors put money into FTX. And yet Bitcoin ETFs only made investing in the cryptocurrency itself more mainstream.
“Cryptocurrency traders are still saying What-the-FTX is going on?” said Edward Moya of Oanda. “Bitcoin and Ethereum are hanging on for dear life to any broader risk appetite.”
Cryptocurrency ETFs are getting hammered
Bitcoin ETF investors are feeling the heat.
A collection of some of the biggest Bitcoin and Bitcoin-related ETFs are down this year anywhere from 25% to 81%. The hardest hit is the $5.6 million in assets Viridi Bitcoin Miners ETF (RIGZ), which is down 81%. The ETF invests in Bitcoin mining and semiconductor manufacturers in developed countries.
The ETF’s top holdings are Riot Blockchain (RIOT) at 11%, Bitfarms at 8% and Cleanspark at 7%. All these stocks gave investors huge losses this year. Shares in Riot alone are down almost 79% this year.
What’s Next for Bitcoin ETFs?
But as big as the losses on Bitcoin ETFs are, it’s too early to write off the asset class, says Roxanna Islam, VettaFi’s assistant director of research.
Islam says the FTX crash is “significant” but far from unique. “We’ve seen similar things happen with Celsius, Voyager Digital, and even with the Terra crash,” Islam said.
And in some ways, the latest FTX implosion could help Bitcoin ETFs appeal more to people who want to retain exposure but with less operational risk.
Instead of relying on a third party like FTX, many Bitcoin investors may choose to buy their own crypto and keep it in their own digital wallets, Islam said. However, it requires you to hold private keys to unlock the wallets. So for investors who don’t want to deal with that, Bitcoin ETFs like BITO, Amplify Transformational Data (BLOK) or Invesco Alerian Galaxy Crypto Economy (SATO) may still appeal.
“After the dust settles, this could be positive for futures-based Bitcoin ETFs like BITO that have an extremely high correlation with Bitcoin without actually holding the asset,” Islam said.
Major Owners of ProShares Bitcoin Strategy ETF
| Holder | Common shares | % change in position | Position date |
|---|---|---|---|
| Goldman Sachs Group, Investment Banking and Securities Investments | 10,549,238 | 19.6% | 30 September 2022 |
| Acorn’s advisors | 1,747,317 | 33.5 | 30 September 2022 |
| Jane Street Group, LLC, Asset Management Arm | 1,032,761 | 10.3 | 30 September 2022 |
| Paragon advisors | 853,842 | 303.8 | 30 September 2022 |
| Susquehanna Int’l | 557,883 | -8.8 | 30 September 2022 |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @Matt Krantz
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