WASHINGTON, DC – MARCH 07: U.S. President Donald Trump (C) speaks alongside Treasury Secretary Scott … [+]
On his first day in office, Trump made a bold promise: Bitcoin will have regulatory clarity by midyear.
Soon after, a Jan. 23 executive order followed, directing the nation’s top policymakers—from the Treasury Secretary and SEC chair to the CFTC chair and Attorney General—to find a way to integrate digital assets into the traditional financial system.
Even ruling out edge cases like a full-fledged “national Bitcoin reserve,” Trump’s wishlist, detailed in the order, marks the most aggressive pro-crypto push in Bitcoin’s history. And there’s already progress.
Right after taking office, Trump’s appointed acting SEC chair, Mark Uyeda, revoked SAB 121—an accounting rule that forced banks to put crypto on their balance sheets, making custody impractical.
What actually comes out of Trump’s pro-crypto push is still unclear, but Wall Street looks eager to call it a done deal.
From financial advisor surveys and money flows to Wall Street’s recent investments, a mounting pile of data points to a major ideological shift about Bitcoin at an institutional level—one that goes beyond empty talk.
ETFs have proved there’s a lot of pent-up demand for Bitcoin
On Jan. 14, 2024, the SEC approved spot Bitcoin ETFs, giving institutional investors a backdoor into Bitcoin. These funds solved three key problems that had kept big money on the sidelines: compliance, tax inefficiencies, and custody.
For the first time, institutions could buy Bitcoin as easily as the S&P 500. The result is nearly $113 billion in inflows in under a year—representing about 10% of Bitcoin’s total market cap.
Demand was so off the charts that Bitcoin ETFs broke records as the fastest-growing ETFs ever, outpacing every other asset class—including its ideological rival, gold.
In the first three trading days, Bitcoin ETFs pulled in $10 billion. For perspective, gold took nearly three years to hit that mark in the early 2000s. Bloomberg ETF analyst Eric Balchunas called it “insane.”
Since its launch, BlackRock’s iShares Bitcoin Trust—the first spot Bitcoin ETF—has collected $53 billion in assets, making it the fastest ETF to hit the $50 billion mark.
“I wasn’t sure we’d ever see it, but I’ve never seen anything like it in my career—something going from 0 to $50 billion in basically six months,” BlackRock CFO Martin Small said earlier this month at the Goldman Sachs U.S. Financial Services Conference.
Within their first year, Bitcoin ETFs have racked up more than $100 billion in assets. Considering that gold ETFs ended last month with $306 billion in assets, Bitcoin is already a third of the way toward matching gold in terms of ETF safe-haven demand.
And this isn’t just a retail-driven frenzy. According to SEC fillings, institutional ownership of Bitcoin ETFs has tripled over the last quarter—from $12.4 billion to $38.7 billion. That’s in stark contrast to a 69% rise from retail investors, according to Fintel.
Ironically, “institutions are perhaps the only investors that remain excited about cryptocurrency right now,” Nick Murcin, founder of Crypto Bureau, told me. And there may be a good reason why.
Bitcoin’s narrative is shifting from speculative bet to portfolio diversifier
Not long ago, Wall Street slammed Bitcoin as the biggest fad in history. Warren Buffett famously called it “rat poison squared,” and JPMorgan’s Jamie Dimon dismissed it as “worse than tulip bulbs.”
But many fund managers who once wrote off Bitcoin have changed their tune. BlackRock and Fidelity have both issued Bitcoin ETFs. Goldman Sachs quietly bought up $1.6 billion worth of Bitcoin ETFs in 2014.
In April 2022, Fidelity became the first firm to let employees add Bitcoin to their 401(k) accounts. Last year, Morgan Stanley became the first major Wall Street bank to allow its advisors to offer Bitcoin ETFs to clients.
Yet, most financial advisors still scoff at Bitcoin due to its volatility and regulatory uncertainty.
A 2024 CoinShares survey found that nearly two-thirds (62%) of financial advisors believe recommending a speculative asset like Bitcoin conflicts with their fiduciary duty.
That could soon change, as fiduciary duty may, on the contrary, compel financial advisors to look into Bitcoin simply because it’s becoming too significant to ignore.
On a recent webinar, Cathie Wood called Bitcoin a promising new asset class that money managers now have “some fiduciary responsibility” to understand—even in its early stages.
While the number of advisors actually allocating crypto to client portfolios remains small, it’s growing fast.
The latest Bitwise and VettaFi survey found that 22% of financial advisors started allocating crypto in client accounts in the past year—twice the rate in 2023 and a record high for the poll.
For context, that’s not far from gold. A recent Bank of America study found that 71% of U.S. financial advisors have little to no gold allocation, often keeping it below 1% of portfolios.
Even BlackRock—the world’s largest asset manager—is making a case for Bitcoin as a portfolio diversifier akin to gold as the traditional stock-bond correlation continues to break down.
“The erratic correlation between stock and bond returns has defined the new regime – and government bonds have become a less reliable cushion against equity selloffs as a result,” BlackRock analysts wrote.
“We see the potential for other diversifiers—old like gold and new like Bitcoin—to step in.”
Wall Street banks are moving into crypto custody
As of today, all crypto held by institutional investors—including Bitcoin in ETFs and brokers that allow digital asset trading—is stored with crypto-native firms rather than traditional banks.
Coinbase dominates this space. Of the 11 SEC-approved spot Bitcoin ETFs launched in January 2024, Coinbase serves as custodian for nine funds, controlling 86.4% of total ETF assets under management.
That raises concentration risk, not to mention the fact that institutional investors remain wary of crypto-native firms—regardless of their size—given high-profile collapses like FTX and security breaches at firms like Bybit.
To address this, Wall Street banks are stepping in to pick up the baton. Citi and State Street—the world’s second- and fourth-largest custodians—have announced they would offer crypto custody services next year.
This isn’t just another sign of crypto’s maturation; it’s also one of the biggest wins from recent regulatory shifts, including the revocation of SAB 121—a rule that forced banks to put digital assets on their balance sheets.
Keeping assets off the balance sheet is what makes traditional asset custody safer and more cost-effective. It reduces reserve requirements for custodians and lowers liquidation risk for asset owners if a custodian collapses.
“Asset managers have to put their assets with some sort of custodian, but with crypto, they do not currently have the ability to place large amounts in banks because of limitations like SAB 121,” wrote John Crabb of Institutional Investor.
“If these limitations go away, asset managers will have more options—they could still use a non-bank custodian for crypto assets, but they would also have the choice of a chartered bank.”
Another telltale sign of crypto’s evolution as an institutional asset is Wall Street’s willingness to become liquidity providers.
Rumor has it that Citadel—the largest market maker on Wall Street—is preparing to enter the digital asset market. If true, it would be the first traditional market maker to provide liquidity in crypto.
According to sources familiar with the matter, as first reported by Bloomberg, Citadel wants to join major exchanges, including Coinbase, Binance, and Crypto.com.
This move follows Citadel’s 2023 initiative to bypass mainstream crypto exchanges—still deemed too risky for institutional investors due to regulatory uncertainty—and create its own institutional-grade trading venue.
“Citadel Securities teamed up with brokerage firms, including Charles Schwab and Fidelity Investments, to form an institution-only crypto exchange that mirrors how assets are held and settled in stock and bond markets. That venue, EDX Markets, went live in 2023 and offers crypto trading exclusively for institutional investors,” wrote Katherine Doherty of Bloomberg.
It’s not just smart money but also conservative money jumping on the bandwagon
Out of fear of missing out, even the most conservative institutional investors are following suit.
“Interestingly, several U.S. states are taking significant steps toward Bitcoin adoption, with pension funds in Michigan and Wisconsin already holding crypto, and Pennsylvania approving legislation to allocate up to 10% into Bitcoin,” Jason Yanowitz, co-founder of Blockworks, told me.
Wisconsin’s state pension fund recently doubled its Bitcoin ETF position to $320 million. Then there’s Michigan, with a $6.6 million investment in Bitcoin ETFs within its $143.9 million pension fund for state employees.
Both allocations represent a significant share of their portfolios—substantially higher than BlackRock’s recommendation of a 1-2% allocation to Bitcoin.
Endowments are also hopping on board. Last month, the University of Austin announced a $5 million Bitcoin allocation within its $200 million endowment, marking the first dedicated crypto endowment fund in U.S. higher education.
Finally, sovereign wealth funds.
Just weeks ago, Abu Dhabi’s sovereign wealth fund, Mubadala Investment Company, revealed a massive $437 million stake in Bitcoin. It’s now the seventh-largest investor in BlackRock’s Bitcoin ETF—the world’s largest Bitcoin ETF by assets.
Norway’s Government Pension Fund Global (GPFG) indirectly owned 2,446 BTC worth around $250 million at the end of the first half of 2024—more than double its holdings from the end of 2023.
Then there’s the speculation about Trump’s proposed Bitcoin national reserve.
What Trump is proposing is similar to the U.S. Strategic Petroleum Reserve, created after the 1973-74 Arab oil embargo. Republican Senator Cynthia Lummis has already proposed a bill suggesting the U.S. acquire 1,000,000 BTC for a national reserve over five years.
It’s a long shot because buying Bitcoin means borrowing, which Trump is trying to avoid. What’s more likely is that he builds a de facto reserve out of the 200,000 BTC confiscated by the federal government—for which Trump already signed an executive order last Thursday.
Any additional Bitcoin purchases would likely require Congressional approval.
Even a symbolic move—relabeling seized Bitcoin as a “reserve”—could spark what some economists call a global Bitcoin arms race, triggering another wave of institutional buying, only this this time at the state level.
No matter how big the push, Trump’s executive powers may not be enough to enact whatever he envisions—even if it’s as simple as reclassifying seized Bitcoin.
Moish Peltz, a partner at Falcon, Rappaport & Berkman, told CoinDesk after Trump’s victory that the rules surrounding seized Bitcoin might change on a department-by-department basis, depending on how it was confiscated. “Some portion of the seized Bitcoin might need an act of Congress, but not necessarily,” he said.
“Trump’s pro-crypto stance has the potential to be a catalyst for transformation, but we need to separate the signal from the noise,” Yanowitz told me. “What the market needs to see moving forward is the administration continuing to push on the policy front.”
Despite the uncertainty, the FOMO factor is already evident at the state level.
There are already reports—though anecdotal—that other developed nations, including Japan, Russia, and China, are actively considering or introducing legislation to acquire Bitcoin ahead of a potential U.S. national reserve announcement.
Meanwhile, while the Trump administration works on a federal-level Bitcoin reserve, 15 states—including Texas, Pennsylvania, and Florida—are considering or have introduced bills to add Bitcoin to their treasuries.
Senator Lummis believes states will lead the way.
“My bet is that you’ll see a state establish a Bitcoin strategic reserve before the federal government,” Lummis said during a conference hosted by crypto personality Anthony Pompliano in New York on Friday, as reported by Bloomberg.
At the end of the day, it’s uncertain whether institutions hold their ground in the face of a broader market sell-off. But one thing is clear: big money is throwing its weight behind Bitcoin as something that’s here to stay.
