The world of Bitcoin investment is experiencing a boom, with exchange-traded products (ETPs) now holding a massive amount of the cryptocurrency.

Think of ETPs as a basket of investments bundled together and traded on a stock exchange, just like a single stock. This open-ended structure allows for easy buying and selling throughout the trading day. ETFs, the most common type of ETP, can hold a variety of assets, including:

• Equities: common and preferred stocks, both domestic and international.
• Bonds are debt securities issued by governments and corporations.
• Options: contracts that give the right, but not the obligation, to buy or sell an underlying asset at a specific price by a certain date.
• Closed-end funds are investment companies with a fixed number of shares that trade on an exchange.

Benefits of ETPs

• Liquidity: Buying and selling ETPs is typically quick and cost-effective, similar to trading individual stocks.
• Diversification: ETPs allow you to invest in a variety of assets with a single purchase, reducing your overall risk.
• Transparency: ETP holdings are typically public knowledge, allowing you to understand what you’re invested in.

Top 3 ETP Picks (US Focus):

1. SPDR S&P 500 ETF Trust (SPY): Tracks the S&P 500 Index, a benchmark for the performance of large-cap US corporations. This low-cost option boasts a long history of impressive returns, making it a solid foundation for any portfolio.
2. Invesco QQQ Trust (QQQ): Follows the Nasdaq-100 Index, comprising the 100 largest non-financial companies listed on the Nasdaq exchange. This ETP offers exposure to the technology sector, a powerful driver of economic growth.
3. iShares Russell 2000 ETF (IWM): Targets the Russell 2000 Index, representing small-cap US companies. While it carries slightly higher risk than large-cap focused options, the IWM offers the potential for higher growth.

These ETPs, which track the price of Bitcoin or provide indirect exposure to it, have collectively accumulated over 1 million Bitcoins (BTC), translating to roughly $68 billion in total value.

This figure includes holdings from both the recent surge of spot Bitcoin ETPs launched in the United States since mid-January, eleven in total, and the pre-existing offerings of twenty-one other Bitcoin ETPs available globally.

Currently, these ETPs hold a significant chunk of the total Bitcoin supply, accounting for approximately 5.08% of the 19.7 million Bitcoins currently in circulation.

Grayscale’s GBTC Trust remains the undisputed leader with its holdings of around 289,040 BTC valued at $19.9 billion, closely followed by BlackRock’s iShares Bitcoin Trust (IBIT).

IBIT boasts holdings of 287,168 BTC worth roughly $19.8 billion and could potentially dethrone GBTC if its inflows continue at a steady pace.

Interestingly, Grayscale has seen a significant decrease in its holdings since attempting to convert GBTC into a spot ETF in mid-January. This reduction amounts to roughly 330,960 BTC, which represents a 53% drop from their previous holdings.

The rapid rise of Bitcoin within ETPs has sparked discussions about its potential impact on self-custody, a method where individuals hold their own Bitcoin directly.

Recent data suggests a stagnation in the number of bitcoins held across various individual addresses, which could be a consequence of this trend.

However, it’s important to note that similar periods of slow growth were observed from 2017 to 2018, so it’s too early to draw definitive conclusions. Currently, only around 1 million addresses hold 1 BTC or more.

The dominance of ETPs is further emphasised by the fact that they hold the largest share of Bitcoin’s price increase so far this year. The number of bitcoins held by ETFs continues to climb steadily, with the US leading the pack by holding over 855,000 BTC globally.

When combined with ETPs in other countries like Brazil, Hong Kong, Canada, and Germany, the total number of Bitcoins held by ETPs surpasses 1 million.

Germany boasts the largest ETF holding outside the US, with the BTCE fund accumulating 22,490 BTC. Following closely behind are two Swedish funds, COINXBE with 17,830 BTC and COINXBT with 14,580 BTC.

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Interestingly, Bitcoin ETFs in Hong Kong, which recently began trading, already hold 5,789 bitcoins.

While the huge size of the US economy is reflected in the dominance of US-based ETPs, with Grayscale, BlackRock, and Fidelity leading the pack, their impact extends beyond national borders.

Research by Kaiko suggests that transaction volumes in Bitcoin surge whenever US markets open, highlighting the global influence of US-based Bitcoin ETFs. In fact, from January to April, a staggering 46% of the cumulative volume in Bitcoin funds originated from US-Bitcoin ETFs.

Before investing, conduct your own research and consult with a financial advisor to determine the best fit for your portfolio.