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More States to Follow Wisconsin in Buying Bitcoin ETFs, Says Finance Professor

Andrew Throuvalas
Last updated: | 2 min read
Wisconsin Bitcoin ETF

Wisconsin’s relatively small investment in Bitcoin ETFs could snowball into something larger by orders of magnitude, according to an ex-finance professor within the state.

Why Did Wisconsin Buy The Bitcoin ETFs?

During an interview with PBS, Marquette University professor emeritus David Krause said the $160 million currently invested by the state represents “just a toe in the water” compared to what’s likely coming.

“I think it’s just an entry point,” Krause argued. “They are testing to see the reaction of the public to whether or not there’s resistance to owning this, and they’re using it as a trial run.”

Throughout the past two months, the world’s largest investment firms disclosed their securities portfolios in mandatory 13F filings with the Securities and Exchange Commission (SEC). This gave Bitcoin fans a chance to see the first major US institutions who had bought Bitcoin through an ETF wrapper after Bitcoin spot ETFs first launched on national securities exchanges in January.

One such investor was the State of Wisconsin Investment Board (SWIB) – a top ten pension fund within the country that bought shares of both BlackRock and Grayscale’s Bitcoin products. The purchase came as a shock to even Bitcoin bulls, who expected a wait before pension fund allocations began, if at all.

As of March 31, SWIB’s Bitcoin ownership represented just 0.4% of its $37.4 billion total securities portfolio and just 0.1% of its $155 billion in total assets.

“It really is not gonna impact the portfolio substantially until you get to maybe a one or two percent positioning,” said Krause.

The professor acknowledged that Bitcoin would add diversification to the state’s portfolio since it doesn’t totally correlate with stocks and bonds. It could also serve as an “inflation hedge,” since it’s a digital currency of a limited supply.

Future Institutional Demand For Bitcoin

In the future, Krause said he expects other states to follow in Wisconsin’s footsteps.

“I don’t expect those that are underfunded can afford to do that,” he clarified, noting that Bitcoin’s high short-term volatility could make it a difficult hold for funds with low liquidity. “I think the long-term trend of this type of asset is gonna be [an] upward slope.”

In a memo last month, Bitwise CIO Matt Hougan noted that many institutional investors make tiny Bitcoin allocations before eventually scaling their investments up to one to five percent of their portfolios.

HighTower Advisors, for example, allocated $68 million to the Bitcoin ETFs last quarter, representing just 0.05% of their total portfolio.

“A 1% allocation of their portfolio to bitcoin would equate to $1.2 billion—all from a single firm,” Hougan wrote. “Multiply that by the growing number of professional investors participating in the space, and you can begin to see what’s behind my enthusiasm.”