Sovereign Funds into crypto (II)

Last week we saw who are the most important sovereign funds and how much money they manage (more than 30T)

  1.  How much money do these big financial players are now in crypto

One of the main characteristics of SIF (Sovereign Investment Funds) is they need clear regulation. They are strongly regulated, and the lack of regulation in the crypto market is one of the main barriers for entry.

It’s hard to know how much money from this SIF is currently invested in crypto because of the lack of transparency. For sure they are invested in big companies such as Tesla, and though this kind of companies, they have some exposure to crypto. 

But we can have an approach if we try a bottom-up analysis. Recent studies say that 1/3 of BTC is owned by 10.000 individual investors (source National Bureau of Economic Research). A big part of the stake is in the hands of miners and exchanges. We could deduce that another big part is owned by early adapters. In 2013 there were 12 million BTC in circulation, and half of the bitcoins (6 million) were owned by only 927 individuals. It’s hard to know if those 1.000 individuals have increased their positions or not in the last years, but they owned 6 Million BTC and that’s 1/3 of the 19 million in circulation we have today. It’s estimated that Satoshi Nakamoto had 1 million BTC. That doesn’t give a lot of space to SIF to own a big stake of BTC (and BTC it’s half of the crypto market cap.)

For sure the SIF has to invest in crypto through corporate crypto holders. If we analyze these holders, at least 23 listed companies hold BTC. Take a look at the biggest ones in the list below.

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As we can see, Microstrategy is the biggest one and only has 845 Million $ in BTC. These 23 corporations own only 0.91% of all the BTC. That’s the final proof that SIF are not yet into the crypto market. The volumes are too low for these huge financial players.

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In November 2021 a study made by ARK Fund estimated that only 7.9% of the total BTC supply could be in hands of governments, regulated instruments, public or private companies:

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Nevertheless, in 2021 we have seen some shine movements from SIF into crypto:

  • The Houston Firefighters’ Relief and Retirement Fund (HFRRF) announced that it was investing $25 million in bitcoin, the first time a U.S. pension fund invested in cryptocurrencies. They did it through NYDIG, a fund manager that raised $1 billion leaded by WesCap to invest in crypto.
  • In 2018, Fairfax County’s Virginia’s Police Officers Retirement System invested in Morgan Creek Digital funds (which invests in blockchain technology) and in September 2021 announced a $50 million investment in Parataxis Capital Management.
  • Pimco, one of the biggest asset managers ($2T) announced in October through the chief investment officer Daniel Ivascyn saying that some of Pimco’s hedge fund portfolios are already trading crypto-linked securities.
  • Altshuler Shaham, an Israeli pension company invested $100 million into the Grayscale Bitcoin Trust fund.
  • CalPERS, California’s $441 billion public pension fund, holds shares in Riot Blockchain, a bitcoin miner.

The moment SIF enters into crypto, it will be a gamechanger for the sector.

Yours in crypto