More States Likely to Follow Wisconsin’s Lead in Buying Bitcoin ETFs, Says Finance Expert

Wisconsin Bitcoin ETF Investment

Wisconsin’s modest investment in Bitcoin ETFs might be the start of a significant trend, according to a former finance professor in the state.

Why Did Wisconsin Buy Bitcoin ETFs?

In an interview with PBS, Marquette University professor emeritus David Krause mentioned that the $160 million investment by the state is merely “a toe in the water” compared to what could be on the horizon.

“It’s just an entry point,” Krause said. “They’re gauging public reaction and using it as a trial run.”

Over the past two months, leading investment firms disclosed their securities portfolios in mandatory 13F filings with the Securities and Exchange Commission (SEC). This allowed Bitcoin enthusiasts to identify the first major U.S. institutions purchasing Bitcoin through ETFs after their launch on national securities exchanges in January.

One such investor is the State of Wisconsin Investment Board (SWIB), a top ten pension fund in the U.S., which acquired shares in BlackRock and Grayscale’s Bitcoin products. This move surprised even Bitcoin advocates, who did not expect pension funds to invest so soon, if at all.

As of March 31, SWIB’s Bitcoin holdings accounted for just 0.4% of its $37.4 billion securities portfolio and a mere 0.1% of its $155 billion in total assets.

“It really won’t significantly impact the portfolio until it reaches a one or two percent positioning,” said Krause.

He noted that Bitcoin could diversify the state’s portfolio since it does not fully correlate with stocks and bonds. Additionally, Bitcoin might serve as an “inflation hedge” due to its limited supply as a digital currency.

Future Institutional Demand for Bitcoin

Krause predicts that other states may follow Wisconsin’s example.

“I don’t expect underfunded states to do the same,” he cautioned, pointing out Bitcoin’s high short-term volatility as a challenge for funds with low liquidity. “But I think the long-term trend for this type of asset is upward.”

Last month, Bitwise CIO Matt Hougan noted that many institutional investors start with small Bitcoin allocations before gradually increasing their investments to one to five percent of their portfolios.

For instance, HighTower Advisors allocated $68 million to Bitcoin ETFs last quarter, representing just 0.05% of their total portfolio.

“A 1% allocation of their portfolio to Bitcoin would equate to $1.2 billion—all from a single firm,” Hougan wrote. “Multiply that by the growing number of professional investors participating in the space, and you begin to see what’s driving my enthusiasm.”