One thing Wall Street is terrific at is laying financial products and expanding the offering so investors (traders) can find whatever they are seeking.
This was something that the crypto industry failed to do.
If you wanted Bitcoin, that is what you purchased. The same held true for Ethereum. We did not see the formation of derivatives or funds that gave people many choices.
Over the last couple years, Wall Street moved into the crypto world. In fact, we can use the proverbial it is "taking it by storm". Few can deny the impact it is having.
We are seeing expansion of the entire industry. Some will argue it is a setback, something that cannot be completely ignored. However, from an access standpoint, things are changing greatly.
It is to the point where we are seeing Wall Street offering layers of crypto where investors have many ways to get involved.
The Growing Number Of Ways For Bitcoin Exposure
The purchase of Bitcoin is still a valid way to get the coin. People can do this either through a custodial wallet or though centralized exchanges such as Coinbase. There are, however, a few other options emerging.
At the beginning of 2024, the crypto world was surprised by the approval of the Bitcoin ETF. This was granted by the SEC under Gary Gensler. It was a move that changed the entire landscape.
We now have the Blackrock Bitcoin ETF nearing $90 billion. This was an important move considering the fact that it allowed pension funds and other retirement accounts to get direct exposure to Bitcion.
The $90 billion is a healthy sum and is not due solely to individuals picking up a few shares here and there. Institutional buying has sprung up, with tens of billions pouring in.
Treasury Companies
Lately, a lot of attention is being paid to Treasury companies. These are those who hold crypto on their balance sheet, often as the primary investment.
The king of this is the company formerly known as Microstrategy. Today, Strategy (MSTR) is one of the largest holders of Bitcoin. Through the use of creative debt instruments, we are seeing near unlimited funding fueling the purchase of Bitcoin.
Others are following suit within the Bitcoin segment. Of course, it is a model that is spreading to other tokens.
The point here is we are seeing the potential to purchase a stock such as MSTR and gain a position for the moves in BTC. The correlation varies since we are dealing with premium purchases, but it does allow entry in. One of the reasons MSTR appeals is that, in spite of the premium paid against BTC, there is leverage. Hence, the returns over the past 5 years exceeded the underlying asset.
We are seeing companies like this used as vehicles to invest in by entities such as the Norway Sovereign Wealth Fund.
Following its latest bi-annual disclosures on Tuesday, the Norway sovereign wealth fund's indirect bitcoin exposure has grown 87.7% in the past six months and 192.7% over the past year to 7,161 BTC ($862.8 million) as of June 30, according to K33, with significant investments in Strategy, Block, Coinbase, MARA, and Metaplanet.
"NBIM's indirect BTC exposure has hit new ATHs of 7,161 BTC," Lunde said on X. "This is my favorite chart to update whenever the world's largest sovereign wealth fund discloses holdings. It efficiently shows that BTC is finding its way into any well-diversified portfolio, deliberate or not."
Strategy is a major piece of this puzzle.
"The increased MSTR ownership, alongside MSTR increasing its BTC exposure by 145,945 BTC in H1, substantially contributed to the 3,340 BTC increase in NBIM’s indirect BTC exposure in the past six months," Lunde said.
It is a concept that will likely spread as more companies as Bitcoin, along with other crypto-assets, to their balance sheet.
Outside of the Treasury companies, some are adding as part of their investment portfolio. The total does not make a large portion of the companies holdings, so it is not the main driver. Also, these firms have a profitable core business, something that Microstrategy was lacking.
We are already to the point where investors have more options when looking to ride the "Bitcoin wave". No longer is one required to purchase the coin itself.