The investors managing the State of Michigan Retirement System decided to take the road less traveled and invest in Bitcoin and Ethereum. A $6.6 million chunk of state employees’ money is now held in ARK 21Shares Bitcoin ETF cryptocurrency, and another amount of $1.4 million was placed in Grayscale Ethereum ETF. The disclosure, was noted in a mandatory regulatory filing, has some stakeholders concerned about the risks associated with dealing in cryptocurrency and questioning whether there weren’t more secure forms of investment to choose.
2 State pension funds now have holdings in cryptocurrency
Michigan is the second state to purchase cryptocurrency shares after spot Bitcoin exchange-traded funds (ETFs) launched in January 2024. This is an indication that crypto assets are starting to look attractive to institutional investors, meaning those who make investments on behalf of others. This is a significant boost for crypto, which hasn’t always been taken seriously in recent years after the initial interest in the early years.
In May 2024, it was made public that the Wisconsin Retirement System has holdings in the BlackRock’s iShares Bitcoin Trust and a stake in the Grayscale Bitcoin Trust. Of the trust’s $156 billion in assets, $99 million sits in BlackRock and $63 million is held by Grayscale.
Michigan’s previous crypto investments drew healthy profits
Michigan announced its cryptocurrency investments in July 2024. The investors in charge of the state’s $107.5 billion public pension system decided to test the waters with a tiny portion of the funds under their control, a move that only one other comparable fund has been prepared to make. However, their show of confidence and profit yield may open the floodgates for others.
As reported in July, $6.6 million of the State of Michigan Retirement System’s funds were sitting in Bitcoin which is the most well-known cryptocurrency and among the most trusted. Another favored currency is Ethereum, and the Michigan fund has allotted $1.4 million to Grayscale Ethereum ETF.
$39 million earned off cryptocurrency
Ron Leix, a spokesman for the Michigan Department of Treasury, revealed that the fund has actually invested a total of $45 million in cryptocurrency, and many people may be surprised how high the dividends are: the initial investment has already been recouped and another $39 million has been earned from crypto alone, with $20 million returned to the fund. In the cryptocurrency world, Michigan’s assets are described as “to the moon.”
Despite the healthy profits on the crypto investments, these amounts are a drop in the ocean of the billions in the fund, and investors have no intention of upping their investment pledges. After noting that a private company is in charge of the retirement system’s investment decisions, Leix explained:
“Cryptocurrency doesn’t play a major role in our investments. There isn’t an active strategy to invest in bitcoin and cryptocurrencies.”
What Bitcoin trends can be expected?
Over the last six months, $39 billion has been invested in the nine new Bitcoin exchange-traded funds, and it’s reported that retail investors account for the bulk of that. Analysts are looking out for institutional demand, saying that this form of investing tends to have longer terms, which could lead to a less volatile Bitcoin.
On one hand, it looks like Michigan and Wisconsin may have started a trend. The Jersey City Mayor recently revealed plans to invest in Bitcoin, although he didn’t say when. On the other hand, there are some stubborn holdouts like the Detroit Police and Fire Retirement System, which has refused to put money into anything crypto-related despite years of research by financial advisors.
How are Bitcoin trends looking?
In August 2024, Bitcoin dropped 12% to $52,054, the biggest decline in two years since November 2022. Cryptocurrency is now performing similarly to stocks, which means it’s not so “safe” anymore. While recession fears abound, the trend could continue.
It’s interesting to note that this year, cryptocurrencies drew attention from institutional investors after the SEC (Securities Exchange Commission) approved ETFs to operate by tracking Bitcoin and Ethereum, which is a positive sign. Cryptocurrencies are likely to be incorporated into more traditional portfolios in future.
