According to Jamie Hannah, VanEck’s deputy head of investments and capital markets, bitcoin ETF flows surged significantly since the December 2024 quarter, with November marking the strongest month so far. The VanEck Bitcoin ETF (VBTC) alone saw more inflows than all other bitcoin ETFs combined in the previous three months.
“While flows have mostly come from retail investors, we’re starting to see more advisers incorporate bitcoin exposures based on client demand,” Hannah told InvestorDaily.
As financial advisers jump in, institutional investors are also showing interest, drawn by ASX exposure, positive research ratings, and tightening global regulations.
“The ability to get bitcoin exposure on the ASX was certainly a turning point, providing investors with access from a trusted provider and the comfort of secure, institutional-grade protection,” Hannah explained, adding that positive ratings from research houses like Lonsec have helped to drive greater interest.
Hannah also highlighted global efforts to establish comprehensive crypto regulations as key to legitimising bitcoin as an asset class.
“The movement towards developing comprehensive cryptocurrency regulatory frameworks in the US and other markets has also been a positive development that will further establish bitcoin as a legitimate asset class at the institutional level,” he said.
But despite the growing interest, Marc Jocum, investment strategist at Global X, said Australian institutions remain cautious.
Speaking to InvestorDaily, Jocum said that while institutions are exploring bitcoin ETFs, they are still in the “conversation phase”.
“The demand for bitcoin ETFs in Australia has been predominantly retail-driven, with some financial advisers starting to explore how they could integrate these products into client portfolios,” he said.
“While institutional interest is growing, it remains largely in the ‘conversation phase’ rather than the ‘implementation phase’. Many institutions might still be working through regulatory, operational, and risk considerations before committing their capital.”
According to Jocum, Australian institutions still show a broader preference for illiquid alternatives like private equity, private debt, and infrastructure, rather than liquid alternatives such as gold or bitcoin.
“Broadly speaking, institutional investor appetite for bitcoin within superannuation falls into three camps,” he said, including those embracing bitcoin (like AMP), those firmly against it (like UniSuper), and those observing the space but not yet committing.
“I understand the cautious approach, particularly given the potential risks associated with failing APRA’s superannuation performance tests,” the investment strategist said.
While acknowledging the hesitation, especially since bitcoin is not included in the Comprehensive Product Performance Package Investment Index, Jocum highlighted research suggesting that allocating a small percentage of a portfolio to bitcoin can enhance diversification and offer potential upside.
“Compared to markets like the US, where institutional adoption of bitcoin ETFs has gained significant momentum – for example, Abu Dhabi's sovereign wealth fund, Mubadala Investment Company, is now the seventh-largest known holder of the world's largest bitcoin ETF – Australian institutions seem to remain more cautious," he said.
“However, interest is gradually building as the market matures, but I think Australia is taking a more measured approach,” Jocum said, adding that as concern grows over debt and fiscal deficits, some investors see bitcoin as a hedge against fiat currency debasement, boosting its appeal as an alternative store of value.
A Reuters report last week revealed that over in the US, asset managers, including wealth firms, hedge funds, and pension funds, increased allocations significantly to bitcoin ETFs in Q4 2024. Among those highlighted was Mubadala, which took an 8.2 million share stake in the iShares ETF that's worth US$436.9 million, and the State of Wisconsin Investment Board, which more than doubled its bitcoin ETF holdings to 6 million shares by 31 December.
Significant growth predicted
Bitcoin ETFs are broadly seen as a simpler, safer option than direct investments into the crypto currency, avoiding the complexities of custody, security, and futures contracts.
With the Australian bitcoin ETF market valued at over $500 million, Jocum predicts it could exceed $1 billion in one-to-two years, fuelled by price growth and institutional momentum.
"This growth could be driven by the increasing adoption of ETFs as a vehicle for bitcoin exposure, along with potential price appreciation of the underlying asset," he said.
"Once institutional investors give bitcoin the green light and begin allocating capital, it could act as a catalyst for broader adoption - almost like a stamp of approval," Jocum explained, adding that institutional flows have the potential to create a ripple effect, encouraging further investment from other institutions, financial advisers, and retail investors.
“Momentum often fuels more momentum. As confidence builds and adoption increases, it could drive greater legitimacy for crypto ETFs in the Australian market, particularly if they become the go-to investment vehicle for bitcoin exposure.”
Hannah expects crypto initiatives from the Trump administration to drive greater institutional bitcoin investment in the US but, like Jocum, remains cautious about their impact on Australia.
“Other markets globally will be influenced by the US, but time will tell whether this will translate to increased institutional investment in Australia,” he said.
