The approval of spot Bitcoin exchange-traded funds (ETFs) in the United States has created a much-needed vehicle for capital flow from traditional finance (TradFi).
The U.S. spot Bitcoin ETFs are the first vehicles enabling institutions to easily invest in Bitcoin (BTC), according to David Prinçay, the president of Binance France.
Prinçay told Cointelegraph in an exclusive:
“Before [ETFs] institutions had an excuse: we want to expose our retail investors to Bitcoin but we don't know how which products and there's not enough trust etc. The arrival of ETFs created a vehicle for institutions to integrate those kinds of products into traditional offers.”
Before the approval of ETFs, large financial institutions in Europe were unable to invest in Bitcoin, which has since changed, according to Prinçay:
“Before, it was impossible for a bank in France to invest in Bitcoin…”
BNP Paribas, the second-largest bank in Europe, invested in BlackRock’s spot Bitcoin ETF during the first quarter of 2024. Although the initial investment was only $41,684, which is less than the value of one Bitcoin, Prinçay described the investment as primarily “symbolic.”
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ETFs made Bitcoin a tool for retirement
Thanks to the debut of spot Bitcoin ETFs, Bitcoin is increasingly viewed as a financial asset for retirement, even by mainstream investors.
Binance France’s Prinçay explained:
“Before it was only the early adopters that considered that Bitcoin would be a tool for their retirement. And now everyone is considering having 1%, 2%, or maybe 5% of their 401(k) in Bitcoin.”
Some large financial institutions, like Fidelity, enable investors to gain direct exposure to Bitcoin ETFs through their 401(k) retirement plans. Fidelity is also the largest 401(k) plan provider in the U.S.
Moreover, these types of investments bring long-term capital that could reduce volatility, added Prinçay:
“401k is not the traditional trading like buying and selling every day. It's not a daily trading activity. It's a long-term activity… Bitcoin may become one of the preferred assets inside the 401(k) in terms of safety.”
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Most Bitcoin ETF holders are still retail investors, but that’s good news
Despite promising to bring more baby boomers into Bitcoin, over 85% of the underlying BTC is held by retail investors, with only 10% held by hedge funds.
However, this is in line with the natural evolution of newly-launched trading products as most of the world’s cash belongs to retail investors.
Moreover, this isn’t the same crypto retail investors who previously held BTC in a cold wallet, but also include TradFi retail investors, explained Prinçay:
“It's retail, but at the same time, it's not the retail that we are used to speaking about. This means that ETF went into a lot of traditional finance products owned by retail people… So the 401(k)is a retail product, but to have access to Bitcoin inside 401(K), you have to have the institutions that open the door.”
The U.S. spot Bitcoin ETFs have absorbed 4.29% of Bitcoin’s supply since launch, according to Dune.
