Bitcoin ETFs are gaining institutional interest as potential replacements for bonds in portfolios
From Cointelegraph
June 26, 2025 11:05 AM:
Bitcoin ETFs have seen a surge in institutional interest since US SEC approval in January 2024. Institutional holdings grew to $27.4 billion by Q4 2024, a 114% increase from the previous quarter. Major players like BlackRock and Fidelity now manage Bitcoin ETFs, with RIAs holding over $10.3 billion in spot Bitcoin ETFs.
Bitcoin outperformed major asset classes in 2024 with a 114% return, but its volatility is higher than bonds and equities. Traditional bonds offer stability and predictable income. The 60/40 portfolio model is being reconsidered due to low bond yields. Bitcoin ETFs are attracting significant inflows, offering an alternative for fixed-income portfolios.
Pension funds like SWIB, Michigan State, and Houston Firefighters are exploring Bitcoin ETFs for enhanced returns. SWIB invested $163 million in Bitcoin ETFs in Q1 2024, while Michigan allocated around $7 million to ARKB. The Houston Firefighters’ Fund also invested in Bitcoin before ETF approvals, recognizing its potential in modern portfolio theory.
Tokenized bonds and crypto-backed fixed income products are gaining institutional attention. BlackRock’s BUIDL fund tokenizes US Treasurys, cash, and repo agreements on blockchain platforms. Franklin Templeton’s OnChain US Government Money Fund tokenizes US government securities and cash. Crypto-backed yield products aim to offer fixed-income-like returns using blockchain-native collateral.
Bitcoin ETFs come with challenges for institutions, including volatility, regulatory uncertainty, lack of yield, and operational risks. Despite these challenges, Bitcoin ETFs offer diversification and growth opportunities for institutional investors. A balanced approach with a modest allocation to Bitcoin ETFs can enhance portfolio performance in evolving financial landscapes.
Read more at Cointelegraph: Can Bitcoin ETFs replace bonds in institutional portfolios?