The launch of the first spot Bitcoin (BTC) exchange-traded funds (ETFs) in the United States was expected to usher in a new era of institutional adoption, but the gains in BTC price since their launch have been driven by retail traders, according to analysts at JPMorgan.
As reported by Bloomberg, JPMorgan strategists led by Nikolaos Panigirtzoglou said that the market-wide rally in the crypto market that has seen tokens like Bitcoin and Ethereum (ETH) climb to their highest price in years is due to the return of mom-and-pop investors, not new buy-in from institutions.
Using on-chain Bitcoin flows from small wallets as a proxy for retail traders, the analyst found that small transactions have far outpaced those coming from institutional investors after adjusting for inflows into the spot Bitcoin ETFs.
They noted that adjustments were necessary to help differentiate between retail traders who invested in the ETFs as large institutional wallets would otherwise appear larger than they truly are.
The report suggested that these smaller investors might be looking to front-run several notable developments that will unfold in the months ahead.
“The revival of the retail impulse in February perhaps reflects the anticipation of three main crypto catalysts over the coming months: the Bitcoin halving event, the next major upgrade of the Ethereum network and the prospect of approval of spot Ethereum ETFs by the SEC in May,” they said. “We believe that the first two catalysts are largely priced in, while for the third catalyst we only see a 50% chance.”
Block Inc., PayPal Holdings, and Robinhood Markets have all recently released reports showing net positive Bitcoin purchases by customers in the fourth quarter of 2023, JPMorgan noted, which is a marked improvement from the negative sales seen in the third quarter. Coinbase also reported the highest quarterly Bitcoin trading volume in two years in Q423.
Both retail and institutional flows into Bitcoin are expected to continue for the foreseeable future as investment advisory firms slowly warm up to offering their clients access to the new ETFs.
Carson Group, an Omaha, Nebraska-based registered investment advisory that has $30 billion on its platform, has announced that they now support four of the BTC ETFs, including BlackRock’s IBIT, Fidelity’s FBTC, Bitwise’s BITB, and Franklin Templeton’s EZBC, according to Bloomberg.
Grant Engelbart, the firm’s vice president and investment strategist, said they selected these products because IBIT and FBTC have seen “significant asset growth” and trading volume, while BITB and EZBC offer some of the lowest fees of all the offerings.
“We feel it is important to offer these products as a result from two of the largest asset managers in the industry,” Engelbart said of BlackRock and Fidelity’s ETFs. “Bitwise and Franklin Templeton have committed to being the lowest-cost providers in the space, and have also seen large inflows and trading volumes. Both firms also have established in-house digital asset research teams and expertise that we feel are beneficial to the continuing growth and management of the products, as well as advisor research and education.”
Financial advisors are the gatekeepers to large caches of wealth earmarked for investment in various financial markets, so BTC ETF integration with platforms like Carson Group is a primary goal for the asset managers behind the various ETFs.
According to data provided by Farside, after recording the first net outflow day on Wednesday which saw the ETF’s collective assets under management decline $35 million, inflows resumed on Thursday, and the total invested in all of the ETFs as of the close of business on Thursday was $5.27 billion.