Finance Professor Predicts More States Will Invest in Bitcoin ETFs Following Wisconsin’s Lead
According to a former finance professor from Marquette University, Wisconsin’s initial investment in Bitcoin ETFs could pave the way for other states to follow suit on a much larger scale. Professor David Krause stated in an interview with PBS that the current $160 million investment by Wisconsin is just the beginning and serves as a test to gauge public reaction and resistance to owning Bitcoin.
Over the past two months, major investment firms have disclosed their securities portfolios, revealing the first US institutions to invest in Bitcoin through ETFs. One surprising investor was the State of Wisconsin Investment Board (SWIB), a top ten pension fund in the country, which purchased shares of BlackRock and Grayscale’s Bitcoin products. This move came as a surprise to Bitcoin enthusiasts, who expected pension funds to wait before allocating funds to Bitcoin.
As of March 31, SWIB’s Bitcoin holdings represented only 0.4% of its $37.4 billion securities portfolio and 0.1% of its $155 billion total assets. Professor Krause mentioned that Bitcoin’s impact on the portfolio would be minimal until it reaches a one or two percent allocation.
Krause acknowledged that Bitcoin would provide diversification to the state’s portfolio, as it has a low correlation with stocks and bonds. Additionally, it could serve as an inflation hedge due to its limited supply as a digital currency.
Looking ahead, Krause expects other states to follow Wisconsin’s lead. However, he clarified that underfunded states may struggle to afford such investments due to Bitcoin’s high short-term volatility and potential liquidity challenges. Nonetheless, Krause believes that the long-term trend for Bitcoin as an asset class will continue to rise.
In a recent memo, Bitwise CIO Matt Hougan highlighted that many institutional investors initially make small Bitcoin allocations before gradually increasing their investments to one to five percent of their portfolios. For example, HighTower Advisors allocated $68 million to Bitcoin ETFs last quarter, representing only 0.05% of their total portfolio. Hougan emphasized the potential for significant growth as more professional investors enter the space.
It remains to be seen how many states will follow Wisconsin in investing in Bitcoin ETFs, but the momentum seems to be building as institutional demand for cryptocurrencies continues to grow.