Crypto Funds’ Bitcoin Holdings Rise as Investor Demand Rebounds

Digital asset-based trusts and funds have boosted their bitcoin holdings as investor demand has rebounded in the weeks following a number of bank failures.

Data from crypto analytics firm CryptoQuant showed the amount of bitcoin (BTC) held by digital asset managers such as trusts and exchange-traded products (ETP) started to fall sharply in early March, dropping below 688,000 bitcoins on March 14 in the immediate aftermath of the failures of Silvergate Bank, Signature Bank and Silicon Valley Bank.

In the weeks since, however, these fund managers have added back about 4,000 bitcoins, with holdings above 692,000 as of April 2, or nearly $20 billion worth at the current price just above $28,000.

“Recent reports suggest that trust has returned to holdings,” CryptoQuant analyst Grizzly wrote in a note published on March 31. “This, I believe, is bitcoin's first significant test in the face of a severe crisis,” he told CoinDesk.

Grizzly further noted that widespread speculation the U.S. Federal Reserve has reached the end of its interest rate hike cycle has persuaded investors to boost their holdings.

While Fed Chair Jerome Powell gave no assurances of a pause at his last press conference in late March, the CME FedWatch Tool currently shows 58% of traders are not expecting a rate hike at the next Federal Open Market Committee meeting in May.

"Investors seem to be adopting a wait-and-see approach since the initial rush back into bitcoin,” James Butterfill, head of research at European digital asset manager CoinShares, told CoinDesk. "It still isn’t clear if the Fed’s bailout program has stemmed the run on banks.”

"We believe [the Fed] has only kicked the can down the road and that the Fed is stuck between not raising rates and causing an inflation problem, or raising rates and causing a banking crisis," he added. "Either way, it is likely to be supportive for BTC in the longer run.”