How Do Institutional Investors Invest in Bitcoin?

Some of the world's largest institutional investors, public companies, and even nation-states are now investing in Bitcoin, further legitimizing this asset class and helping this technology grow. 

Nowadays, organizations deploy various Bitcoin investment strategies, each tailored to their specific objectives and regulatory considerations. 

Read on to learn how institutional investors go about investing in Bitcoin. 

The Rise of Bitcoin Institutional Adoption

Bitcoin’s emergence from a mostly retail investor-dominated market to institutional acceptance took a giant leap on January 10, 2024, the day the US Securities and Exchange Commission (SEC) approved spot Bitcoin exchange-traded funds (ETFs).

The approval was the final proof that Bitcoin was here to stay, as traditional investment companies such as BlackRock, Fidelity, Ark, and VanEck, among other ETF operators, pushed for BTC institutional adoption.

The launch of spot BTC ETFs was recognized as the most successful launch in the history of all ETFs and it took less than a year for them to surpass gold ETFs in the U.S. by assets under management.

Spot Bitcoin ETFs allowed institutional investors to clear regulatory hurdles and forgo the woes of learning how to actually buy and store Bitcoin while still receiving exposure to the BTC price movement through a traditional instrument that trades in a standard equity brokerage account.

Bitcoin ETFs further established themselves in the institutional landscape when the SEC approved the listing and trading options for BlackRock’s spot Bitcoin ETF on the Nasdaq in September 2024. 

In the same year, Bank of New York Mellon (BNY), the world’s largest custodian bank, was approved to offer institutional Bitcoin custody services for BTC ETFs, providing another entry point for U.S. institutions.

Most recently, in March 2025, Donald Trump signed an executive order establishing the Strategic Bitcoin Reserve in the U.S., further cementing BTC’s role in the global arena and potentially prompting an international race among other countries to establish similar reserves. 

It also makes it harder for institutional investors to argue against investing in BTC.

Moreover, according to a 2023 survey by Institutional Investor, 64% of crypto asset investors expect to increase their allocations in the following three years, and 45% of institutional investors without crypto asset exposure anticipate investing in the same period. 

Institutional Bitcoin Ownership: How Institutional Investors (Actually) Invest in Bitcoin

As it happens, institutions have several avenues to gain exposure to the flagship crypto asset:

Bitcoin ETFs

ETFs have become a go-to vehicle for many institutional investors of all sizes to access Bitcoin, for a couple of very compelling reasons:

• Accessibility: BTC ETFs have opened a world of opportunities for institutions to gain easy exposure without the complexities of direct Bitcoin institutional ownership, which may include potential concerns regarding custody and security.
  
• Regulatory compliance: Bitcoin ETFs operate within established regulatory frameworks, providing a level of oversight, ease, safety, and legitimacy, reducing perceived risks and uncertainties associated with crypto assets.

Following their debut in the U.S. market, it took only half a year for spot Bitcoin ETFs to attract over 1,000 Bitcoin institutional investors. BlackRock’s iShares Bitcoin Trust alone boasted more than 660 holders at the time, signaling powerful interest.

Direct Bitcoin Purchases (with Institutional Crypto Custody)

Some organizations opt for direct acquisition of Bitcoin, buying through exchanges, brokers, or over-the-counter (OTC) institutional BTC trading desks and leveraging specialized custodial services, which provide them with:

• Security and regulatory compliance: Platforms like Coinbase Custody offer storage solutions tailored for institutions with extensive crypto asset holdings, addressing security and legal certainty concerns.
  
• Control and flexibility: Direct Bitcoin institutional ownership allows organizations to manage their holdings in line with their specific investment strategies. For instance, they may want to use BTC as collateral to secure loans.

Case in point: business intelligence company Strategy (formerly MicroStrategy) has accumulated nearly 500,000 BTC ($41 billion) as a strategic move to integrate Bitcoin into its corporate treasury, inspiring many other listed companies to follow suit.

Investments in Bitcoin Companies

Beyond direct investments and ETFs, institutions are engaging with the Bitcoin ecosystem through direct investments into Bitcoin companies via venture investing or buying shares of listed Bitcoin companies:

• High growth potential: With other tech sectors delivering more measured returns, some businesses see the potential for greater returns in the Bitcoin industry’s future.
  
• Emerging managers’ interest: The share of emerging funds seeking to back crypto asset companies bumped up to 10% in 2024, in line with the ongoing trend from the last few years, even when crypto’s share of overall VC deals fell in 2023.

This approach allows businesses to capitalize on the growth of the Bitcoin industry without holding BTC directly.

Why Should Institutions Invest in Bitcoin?

Investing in Bitcoin offers several potential benefits to institutions, such as:

Portfolio diversification and management

For those seeking to diversify their investment portfolios, Bitcoin, as an alternative asset class, represents another opportunity for diversification. 

Also, while the BTC’s correlation with the stock market has somewhat increased with the institutional investor arrival, Bitcoin has historically outperformed traditional asset classes over longer periods. 

Hedge

As an asset with a fixed supply (capped at 21 million BTC), Bitcoin is viewed by some as a hedge against inflation, currency debasement, and economic uncertainty. 

Thanks to Bitcoin’s decentralized nature and limited supply, it may protect wealth against the shortcomings of traditional currencies and asset classes.

High return potential

Historically, Bitcoin has demonstrated significant appreciation in price, offering the possibility of substantial returns. For example, over the past 10 years, BTC's return on investment surpassed 26,000%, compared to Gold's 125% and S&P 500's 193%. 

Technological innovation

Engaging with the Bitcoin blockchain and network positions institutions at the forefront of financial innovation, potentially unlocking new business opportunities. This primarily concerns companies involved in payment processing and digital services, but may certainly expand further.

Client demand

As interest in Bitcoin continues to grow among retail investors, institutions may want to invest in it to not only meet client demand but also retain these clients, bring in new ones, and provide additional investment opportunities in the increasingly competitive environment.

The Takeaway

The increasing involvement of institutional investors in the biggest cryptocurrency signifies a maturation of the Bitcoin market. 

Through various investment vehicles, such as ETFs, direct purchases with custodial services, and direct investments in companies, businesses are integrating Bitcoin into their portfolios.

Considering the potential benefits, including portfolio diversification, hedging, and high-return prospects, Bitcoin has become an attractive option for institutional investors navigating the ever-changing and evolving financial landscape.

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Disclaimer: The content of this blog post is not investment advice and does not constitute any offer or solicitation to offer or recommendation of any investment product.

FAQs

What challenges do institutions face when investing in Bitcoin?

Institutions encounter several challenges when investing in Bitcoin. These include regulatory uncertainty and complexities across jurisdictions, concerns regarding the safety of BTC in custody, and Bitcoin price fluctuations that pose risks to portfolio stability. 

However, all these challenges are becoming less significant, as regulatory clarity increases, custody solutions are now better suited for institutional needs, price volatility is decreasing while BTC itself is being more and more legitimized around the world.

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