The approval of Bitcoin ETFs by the US Securities and Exchange Commission (SEC) in January 2023 has opened the floodgates for significant institutional investment in the newly approved market. However, American states are also rushing to capitalize on its success ETFs by using part of their pension funds to make a profit and diversify their investments.
Wisconsin, Jersey City, Michigan allocate millions to Bitcoin ETFs
The first state to take the plunge was Wisconsin, in May 2023 assigned approximately $98.6 million, or 2% of the pension fund, to BlackRock’s iShares Bitcoin Trust ETF.
Now, two more states have joined Wisconsin in allocating state pension funds to Bitcoin ETFs. Thursday NewsBTC reported that Jersey City Mayor Steven Fulop has announced that it is updating its paperwork with the SEC to allow its pension fund to invest in Bitcoin ETFs.
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The latest state to join the Bitcoin ETF investment bandwagon is Michigan; like in a SEC submit On Friday morning, the State of Michigan Retirement System reported that it owned $6.6 million worth of shares in the ARK Bitcoin ETF managed by Ark Invest, which amounted to 110,000 shares as of June 30.
However, Jersey City remains the only one to disclose the percentage of the fund’s investment in the Bitcoin ETF market and which one asset manager will be selected to manage the fund’s allocation.
Still, this highlights the significant traction the new Bitcoin ETF market has gained among institutions and now in these states over the past seven months, contributing to the remarkable inflow and assets under management surpassing the $17 billion mark, eclipsing technology-based ETFs.
BTC Price Recovery Powered by Spot ETFs
The Bitcoin price has been steadily recovering over the past two weeks, recovering from a six-month low of $53,500 in early July. However, according to a new one report by on-chain and market data analytics firm CryptoQuant, this price recovery has remained dependent on spot Bitcoin ETFs rather than a wave of new investor inflows.
The CryptoQuant report examined Bitcoin price movements and new investor positions over the past eight years and found that over the longer term bull cyclesBitcoin price spiked when the number of new entrants exceeded a certain threshold, indicating a strong fear of missing out (FOMO) driving inflows.
However, the company claims that Bitcoin’s current bull cycle does not show the same trend of new investor inflows against price spikes. Instead, the report noted that the recent spike in new inflows in the first quarter of the year appears to be only a temporary surge between longer term cycle tops.
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This suggests that Bitcoin’s recent price recovery has been driven more by inflows into spot Bitcoin ETFs than by a wave of new investors entering the crypto market.
While spot ETFs have supported the Bitcoin price, the report indicates that more sustainable upside potential will depend on a return of new investor demand.
As I wrote this, the largest cryptocurrency on the market was trading at $67,530, up nearly 5% in a 24-hour span.
Featured image of DALL-E, chart from TradingView.com