Bitwise Predicts Bitcoin Allocation in Portfolios to Reach 3%

Several asset managers have already allocated 3% of their clients’ funds to the leading cryptocurrency, with many more poised to follow suit soon, according to Bitwise CIO Matt Hougan.

Day 19 of 20 on the road. It has been an amazing trip.

A few additional take-aways to share:

1) ETF Flows Will Continue for Years: A good question to ask about the new bitcoin ETFs is whether the incredible inflows we’ve seen in the first two months represent a one-time surge…

— Matt Hougan (@Matt_Hougan) March 26, 2024

He noted that previously, institutional investors harbored concerns about the potential collapse of digital gold to zero. Under such circumstances, Bitcoin’s portfolio share was capped at 1%, despite its impressive performance.

The launch of spot ETFs in the US in January changed the landscape, Hougan believes. With the success of these products, the narrative of a ‘collapse to zero’ has faded, making a target allocation of 3-5% more feasible.

“True institutional investors (pension funds, endowments, etc.) will still maintain allocations below 1%, but for the wealth management market, over 3% is the new theme,” wrote the Bitwise manager.

He pointed out that despite the ongoing inflow into bitcoin ETFs, many large investors are still unable to invest in these instruments.

According to Hougan, over a hundred institutions are conducting due diligence on these products, a process expected to take at least two years.

The expert compared the situation to the introduction of gold-based ETFs, which took about seven years to capture their market share. Hougan believes Bitcoin will achieve this more swiftly.

He is convinced that demand for the asset from end investors is only beginning to emerge.

In response to a question about the impact of regular portfolio rebalancing on Bitcoin’s price, Hougan noted that overall, it should reduce volatility.

Earlier, CoinShares suggested that bitcoin ETFs might face a demand shock in the coming months.