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Bitwise CIO Predicts Sustained Demand for Bitcoin ETFs, Highlights Investment Trend Shifts

Matt Hougan reveals a steady demand for Bitcoin ETFs and a strategic shift in investor allocations from 1% to over 3%. Differences in investor interest between the US and UK due to regulatory environments are also highlighted.

  • Bitwise CIO Matt Hougan reports a consistent and long-term demand for Bitcoin ETFs, anticipating widespread acceptance and integration into investment portfolios, as evidenced by the due diligence processes set to continue over the next few years.
  • Hougan observes significant differences in Bitcoin ETF investment between the US and the UK, with the US experiencing a surge in capital inflow, while the UK's market lags due to regulatory caution.
  • He also notes a shift toward larger Bitcoin allocations among professional investors, moving from 1% to allocations over 3%.

Bitwise CIO Matt Hougan has been interacting with investors and capital allocators this month. Recently, he shared insights on X (formerly Twitter) from his conversations, revealing evolving trends in the cryptocurrency investment landscape.

Firstly, the surge in Bitcoin ETF inflows observed in the initial months is not a fleeting trend but indicative of long-term, sustained demand. Despite a wide variance in adoption rates among financial advisors and national account platforms, the overarching trajectory points to gradual, widespread acceptance.

This is evidenced by the meticulous due diligence processes expected to unfold over the next couple of years, reminiscent of the early years of gold ETFs.

During his visit to the Digital Asset Summit 2024 in London, Hougan noted a contrast in investor demand between the UK and the US. While the US sees burgeoning capital inflow into Bitcoin ETFs, the UK's market remains in its infancy, partly due to the Financial Conduct Authority's (FCA) cautious stance on crypto.

Additionally, Hougan highlighted a shift in the professional investors' approach to Bitcoin allocation. Where a 1% allocation was once the norm, discussions now frequently involve allocations upwards of 3%. 

“I’ve been speaking with professional investors about bitcoin since 2018. For the past six years, the discussion has mostly focused on a 1% allocation. That’s the most that most investors would think about,” wrote Hougan. “Boy has that changed. Almost every investor I’ve spoken with has talked about a 3%+ allocation.”

This change is largely attributed to the introduction of ETFs, which have significantly mitigated the perceived investment risk associated with Bitcoin, making higher allocations more palatable for investors.

While true institutional investors might still prefer allocations below 1%, for the wealth market, a 3% or more allocation is becoming increasingly common.

Edited by Harshajit Sarmah