In a recent report by River, it was revealed that the exposure of hedge funds and registered investment advisors (RIA) to Bitcoin (BTC) via exchange-traded products (ETF) has reached a staggering $34.3 billion as of December 31. This represents a remarkable 357% growth over the course of the year.
The report highlighted that 458 RIAs currently have exposure to BTC, with the weighted average allocation being 0.02%. Interestingly, the investment advisors’ exposure to Bitcoin saw a significant increase from $2.6 billion in the first quarter to $7.1 billion by the end of December, marking a 173% growth.
Furthermore, it was noted that 52% of the top 25 RIAs by assets under management have Bitcoin exposure. Despite this, as of December 31, only 3% of US-based investment advisors had allocated funds to Bitcoin.
On the other hand, hedge funds saw a remarkable 455% increase in exposure to Bitcoin last year, rising from $4.9 billion in the first quarter to $27.2 billion by the end of the year. The report pointed out that only 143 out of over 30,000 hedge funds had investments in BTC as of December 31.
One of the key observations made in the report is the shift in accumulation patterns. Unlike previous cycles, institutional accumulation is now dominating the current bull run. Individual investors were seen shedding 525,000 BTC in 2024, while funds and ETFs bought 519,000 BTC and businesses added 374,000 BTC to their treasuries, a 31% increase from 2020. This shift in accumulation, combined with the growing interest from hedge funds and RIAs, suggests that institutions are playing a significant role in driving Bitcoin prices.
The report also highlighted that Bitcoin adoption is still in its early stages, with only 3% of its full potential realized. When considering the $900 trillion global wealth market, Bitcoin currently represents just 0.2% of it. However, the addressable market for Bitcoin is estimated to have a market cap of $225 trillion, based on its potential to capture half of the store-of-value assets market. This indicates that Bitcoin is currently below 1% of its addressable market.
Furthermore, institutional exposure to Bitcoin stands at only 0.006% of the $128 trillion of US investment advisor money allocated, which is significantly lower than the estimated fair value. The report suggested that increasing institutional exposure to Bitcoin to its current percentage of global wealth (0.2%) would require a 36X rise in exposure, equating to $249 billion in investment.
Additionally, less than 4% of the global population currently owns Bitcoin, and individual ownership is expected to increase as awareness of its benefits spreads. As institutions continue to show growing interest in Bitcoin, the cryptocurrency’s potential for growth and adoption remains significant.
Overall, the report underscores the increasing institutional interest in Bitcoin and highlights the potential for substantial growth in the cryptocurrency market as more investors and institutions recognize its value and utility.