Listed companies’ Bitcoin holdings hit $9.6 billion as institutional and corporate interest in digital assets grows

But the Bank of England's latest Financial Stability Report sounds a cautionary note and calls for greater transparency of institutional investor holdings of crypto assets to reduce spillover effects.

A staggering $60 billion worth of Bitcoin is held through various Bitcoin closed-ended trusts and exchange traded products, according to analysis conducted by London-based digital assets hedge fund manager Nickel Digital Asset Management.

According to Nickel, these investment funds hold these allocations on behalf of their clients, including a range of retail investors, asset managers, and increasingly, institutional asset allocators.

Most of these funds are located in North America with US and Canadian funds accounting for an overwhelming 75% of the above holdings.

Nickel’s analysis of data from https://bitcointreasuries.net/ on 13th December 2021 also revealed that 20 listed companies with a market cap in excess of $1 trillion have approximately $9.6 billion invested in Bitcoin. According to its analysis, they originally spent $5.9 billion buying the cryptocurrency.

North American corporations also dominate listed company investment in Bitcoin with US and Canadian companies accounting for 13 of the 20, said Nickel. The list also includes corporates based in the UK, Germany, Turkey, Liechtenstein, Hong Kong, Norway, and Australia. Further analysis revealed that 19 listed companies purchased Bitcoin, but they didn’t reveal the full details of their portfolio composition.

Anatoly Crachilov, CEO and founding partner of Nickel Digital, said analysis of digital assets performance versus traditional asset classes shows sizable outperformance by digital assets over the medium to long term. “This helps explain the increasing interest in digital assets by corporations and institutional investors as part of their wider asset allocation.”

According to the Bank of England’s December 2021 Financial Stability Report, crypto assets’ market cap has grown tenfold since early 2020 to around $2.6 trillion as of 24 November 2021, which represents approximately 1% of global financial assets.

While institutional investors and corporates are increasingly being won over by the prospect of higher returns from crypto assets, the Bank of England said their volatility meant investors could lose the entire value of their investment.

If their current rapid pace of growth continues, the BoE’s Financial Policy Committee says these assets will become more ‘interconnected’ with the wider financial system, which could pose a number of financial stability risks.

“For example, material growth in banks’ exposures to unbacked crypto assets would expose them to financial, operational and reputational risks,” the BoE writes in its Financial Stability report. “Although no major UK banks have reported direct exposures to crypto assets as yet, some UK and global banks are starting to offer a variety of services, such as crypto asset derivatives trading, and custody services.”

Stresses in crypto asset markets could also spill over to broader financial markets, the BoE warns. “For example, if institutional investors embed crypto assets as a core part of their portfolios, a large fall in crypto asset valuations may cause investors to sell other financial assets and potentially transmit shocks through the financial system.”

The bank says the use of leverage can amplify such spillovers further, should investors be forced to meet margin calls on their crypto asset positions by selling other assets.

While surveys and market intelligence suggest that crypto assets currently represent only a small fraction of institutional investor portfolios at present, the BoE says they have the potential to grow rapidly. “Greater focus is needed on enhancing the transparency of institutional investor holdings as crypto asset markets continue to grow,” it states.

«