It's not just amateurs getting hit by the Bitcoin ETF crash. The implosion is snaring big Wall Street firms and pros, too.
Goldman Sachs is the largest holder of ProShares Bitcoin Strategy ETF with 10.5 million shares. That's as of the latest position size filing on Sept. 30, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence. Goldman Sachs actually increased its position by nearly 20% during the third quarter. And shares of the largest Bitcoin ETF, which invests in Bitcoin futures, lost two-thirds of their value this year.
Meanwhile, Morgan Stanley Investment Management and ARK Investment Management are the No. 2 and No. 3 largest holders of another popular Bitcoin fund, Grayscale Bitcoin Trust as of their latest filings on July 31 and Sept. 30, respectively. Morgan Stanley owned 11.2 million shares and ARK Investment 6.5 million shares. Grayscale Bitcoin is down 74% this year.
"Now, it appears, the crypto world is grappling with a crisis of its own." said Jack Ablin, strategist at Cresset Capital Management. "While it's too early to predict a widespread crypto cascade, this year's events carry broader implications for investors."
How widespread and serious is the impact from falling Bitcoin prices?
Who Owns Bitcoin?
It's a bad year to own Bitcoin. The price of Bitcoin dropped 74% this year to less than $17,000, says Coinbase.
Bitcoin prices are collapsing this year amid a stock market bear market, rising dollar and economic weakness. And the financial implosion of Bitcoin exchange, FTX, also shook the entire cryptocurrency ETF ecosystem.
Questions remain of how widespread pain from Bitcoin ownership is. Many large venture capital investors put money into FTX. And yet, Bitcoin ETFs only made investing in the cryptocurrency itself more mainstream.
"Cryptocurrency traders are still saying What-the-FTX is happening?" said Edward Moya of Oanda. "Bitcoin and Ethereum are hanging onto any broader risk appetite for dear life."
Cryptocurrency ETFs Get Hammered
Bitcoin ETF investors are feeling the heat.
A collection of some of the largest Bitcoin and Bitcoin related ETFs are down this year anywhere from 25% to 81%. The hardest hit is the $5.6 million in assets Viridi Bitcoin Miners ETF, which is down 81%. The ETF invests in Bitcoin mining and semiconductor makers in developed nations.
The ETF's top holdings are Riot Blockchain at 11%, Bitfarms at 8% and Cleanspark at 7%. All of those stocks handed investors massive losses this year. Shares of Riot alone are down nearly 79% this year.
What's Next For Bitcoin ETFs?
But as large as the losses on Bitcoin ETFs are, it's too soon to write off the asset class, says Roxanna Islam, VettaFi's associate director of research.
Islam says the FTX crash is "significant," but far from unprecedented. "We've seen similar things happen with Celsius, Voyager Digital, and even with the Terra crash," Islam said.
And in some ways, the latest FTX implosion could help Bitcoin ETFs appeal more to people who want to keep exposure, but with less operational risk.
Rather than trusting a third party like FTX, many Bitcoin investors may choose to buy their own crypto and keep it in their own digital wallets, Islam said. That requires holding private keys to unlock the wallets, though. So, for investors who don't want to deal with that, Bitcoin ETFs like BITO, Amplify Transformational Data or Invesco Alerian Galaxy Crypto Economy may still hold appeal.
"After the dust settles, this could be a positive for futures-based Bitcoin ETFs like BITO which have an extremely high correlation with Bitcoin without actually holding the asset," Islam said.
Biggest Holders Of ProShares Bitcoin Strategy ETF
| Holder | Common shares held | % change in position | Position date |
|---|---|---|---|
| Goldman Sachs Group, Investment Banking and Securities Investments | 10,549,238 | 19.6% | Sep-30-2022 |
| Acorns Advisers | 1,747,317 | 33.5 | Sep-30-2022 |
| Jane Street Group, LLC, Asset Management Arm | 1,032,761 | 10.3 | Sep-30-2022 |
| Paragon Advisors | 853,842 | 303.8 | Sep-30-2022 |
| Susquehanna Int'l | 557,883 | -8.8 | Sep-30-2022 |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @mattkrantz
