Following discussions with professional investors about their allocations to bitcoin, “3% is the new 1%,” according to Bitwise CIO Matt Hougan.
“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,” Hougan wrote on X. “Boy, has that changed. Almost every investor I’ve spoken with has talked about a 3%+ allocation.”
Hougan argued the newly-launched U.S. spot Bitcoin 
BTC
-2.14%
exchange-traded funds were the primary reason for the shift, de-risking bitcoin’s downside. “If ‘going to zero’ is off the table, 3% or 5% starts to make more sense,” he said. “True institutional investors (pensions, endowments, etc.) will still eye sub 1% allocations, but for the wealth market, 3%+ is the new new thing.”
The investment chief added that the net inflows into the U.S. spot Bitcoin ETFs — currently totaling around around $11.7 billion just over two months since launch — are indicative of long-term sustained demand that will “continue for years.”
Hougan suggested this was due to “massive dispersion” in the pace of adoption of the ETFs, with some financial advisors already allocating 3% for all their clients and others who haven’t even begun thinking about it.
The Bitwise CIO cited investor demand in the U.K. being behind the U.S. as an example. “It’s hard to believe it, but the U.K. looks longingly at the ‘progressive’ regulatory stance in the U.S.,” he said.
“The truth is, most professional investors still cannot buy bitcoin ETFs. That will change through a series of 100+ individual due diligence processes over the next two years,” he added. “Inflows into the gold ETFs built year-after-year for their first 7 years in the market. I suspect the bitcoin ETF ramp will be shorter, but it will still take years.”
Bitcoin rebalancing should ‘slightly dampen’ volatility
Responding to a question about how the rebalancing of bitcoin allocations as the price fluctuates will impact the market, Hougan expected it to have a dampening effect on volatility.
“More of this generation of bitcoin buyers will rebalance than the buyers from past cycles,” he said. “On the margin, this should slightly dampen volatility in the asset (both up and downside volatility). But it’s a prescient comment: This cycle’s new buyer of bitcoin is different from past cycles.”
Last week, Hougan said, “we’re probably a few weeks away” from the first wirehouse to support spot Bitcoin ETFs. He also argued spot Ethereum ETFs could attract more assets if they launch later than May.
Bitwise’s spot Bitcoin ETF
Bitwise is among the now 11 spot Bitcoin exchange-traded fund providers in the United States.
Its BITB product currently ranks fifth among the ETFs, with around $2 billion in assets under management.
Yesterday, the spot Bitcoin ETFs had their best day in two weeks, generating $418 million in net inflows after witnessing net outflows totaling nearly $888 million last week.
Meanwhile, Tidal and Hashdex announced trading of its DEFI spot Bitcoin ETF had finally begun upon completion of its futures fund conversion on Tuesday.
Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.
© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.