Team Construct: Wall Street’s Water Cooler Joke Has The Last Laugh

Why are professionals from traditional finance crossing the bridge into digital assets?

This was one of the biggest questions being answered as Varys Capital sourced brilliant minds from Morgan Stanley, KPMG, Deloitte, Nomura, BNP Paribas, Lloyds Bank, etc.

Just a few years back, the mere mention of cryptocurrency, Bitcoin, or blockchain was synonymous with immaturity. The emerging asset class was viewed as juvenile, chaotic, and unpredictable. To some of the more astute thought leaders in traditional finance, it was a joke discussed around the water cooler. Times have changed.

The 11 U.S. spot Bitcoin exchange-traded funds (ETFs) have accumulated $269B in cumulative volume and $29B in net inflows as of May 2024.

Some noteworthy records:

  • On launch day, the Bitcoin ETFs generated $4.6B in volume - a record high for ETFs.

  • IBIT reached $10B in AUM in 37 trading days - the fastest-growing ETF ever.

  • The ETFs experienced net inflows of $1.12B on March 12th - a record high for ETFs.

Additionally, CME Group, the world's largest futures exchange, plans to launch Bitcoin trading to capitalize on increasing demand from Wall Street money managers for cryptocurrency exposure. The Chicago-based group is in discussions with traders interested in buying and selling Bitcoin on a regulated marketplace, although the plan has not yet been finalized.

This move would represent a significant step by Wall Street institutions into the digital assets sector following the SEC's approval of stock market funds investing directly in Bitcoin in January. Introducing spot Bitcoin trading on CME, which already hosts Bitcoin futures trading, would facilitate basis trades—a common strategy involving borrowing to sell futures while buying the underlying asset, leveraging the price gap between the two.

Meanwhile, Morgan Stanley disclosed U.S. spot Bitcoin exchange-traded fund (ETF) holdings worth over $270M as of March 31 in a quarterly 13F filing with the SEC.

Morgan Stanley’s Head of Digital Asset Markets, Andrew Peel, described the U.S. spot Bitcoin ETF launch as a potential paradigm shift. Hedge fund Millennium Management, led by Izzy Englander, disclosed roughly $2B across several spot Bitcoin ETFs, including $844M in BlackRock’s iShares Bitcoin Trust, $800M in Fidelity’s Wise Origin Bitcoin Fund, and $202M in Grayscale’s Bitcoin Trust.

Though these are all promising developments, we haven't even touched on a spot Ethereum ETF’s eventual launch—more on that another time.

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