The rise of the Bitcoin ETF
Bitcoin ETFs are investment tools that allow institutional and retail investors to get exposed to Bitcoin without directly owning or controlling cryptocurrency.
The market has grown significantly since the US Securities and Exchange Commission approved the Spot Bitcoin ETF in January 2024.
By the fourth quarter of 2024, US Bitcoin ETF holdings had skyrocketed to $27.4 billion, up 114% from the previous quarter. This rapid adoption demonstrates a growing institutional interest in cryptocurrency exposure. Major players such as BlackRock, Fidelity, Vaneck, Ark Invest and Grayscale manage Bitcoin ETFs. BlackRock’s Ishares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC) are one of the well-known products. The institutional adoption of Bitcoin ETFs is accelerating. Reflecting increased confidence in the asset class, the Registered Investment Advisor (RIA) has become the top holder for Spot Bitcoin ETFs. In June 2025, investment advisors acquired over $10.3 billion in Bitcoin ETFs. The 2024 BNY Mellon report shows that 39% of single-family offices are actively investing or considering crypto investments resulting from client demand and strategic analysis.
The ETF has made it easier for institutions to enter the Bitcoin market, satisfying regulatory compliance and internal risk frameworks. BlackRock recommends portfolio allocations of up to 1-2% on Bitcoin, citing the possibility of diversification and strengthening returns.
Bitcoin vs Bonds: Risk and Returns
The risk-return trade-off is central to comparing Bitcoin ETFs with bonds.
Bitcoin’s historic performance is characterized by high volatility and substantial returns. How to look at:
In 2024, Bitcoin returned 114%, surpassing its major asset class. However, the annual volatility is around 50%, which is significantly higher than bonds and stocks. Epidemic bonds provide stability and predictable income. For example, as of mid-2025, the Ishares 20-Year Financial Debt ETF (TLT) provided a 30-day yield of around 4.55%, while the Vanguard Total Bond Market ETF (BND) provided a 30-day yield of around 3.8%. These ETFs offer a wide mix of long-term Treasury exposure and investment grade bonds, respectively. Each offers attractive options for an income-centric portfolio during the period of interest rates and market volatility.
Interestingly, the Classic 60/40 portfolio has long been considered a benchmark for in-facility and retirement portfolio, allocating 60% for stocks and 40% for bonds. However, the long term period of low bond yields and inflationary pressures is required to rethink this model.
In 2022 and 2023, traditional bond portfolios received negative returns due to rising interest rates, but Bitcoin saw a return to value. This asymmetry has led institutions to reevaluate risk compensation calculations that are allocated only to bonds.
Bitcoin ETFs are increasingly valued as a potential alternative to the bond portion of such portfolios. In 2025 alone, US Spot Bitcoin ETFs had collected over $40.6 billion in net inflows by early February. This was an increase of 175% year-on-year compared to the same period in 2024.
Meanwhile, in May 2025, a record $6.35 billion net inflow was seen in BlackRock’s IBIT of $6.3 billion. These numbers highlight the growing momentum behind Bitcoin as a reliable complement.
Did you know? A 2024 survey by Ark Invest and 21Shares found that adding a 5% allocation to Bitcoin in the traditional 60/40 portfolio has increased volatility, but could increase annual return rates by more than 3%.
ETF Strategy for Retirement and Pension Funds
Retirement and pension portfolios usually prioritize capital conservation, stable income, and inflation hedging.
Traditionally fulfilled by bonds and stable assets, the goals of these portfolios are challenged by long-term low yields and increases. As a result, some advanced institutional investors have begun investigating small controlled Bitcoin ETF allocations to enhance risk-adjusted returns while adhering to conservative orders.
Examples of such pension funds are:
Wisconsin State Investment Board (SWIB): SWIB disclosed its first $163 million investment in the first quarter of 2024 ($99 million in IBIT and $64 million in GBT). By the end of 2024, IBIT’s position had expanded to $321 million, spanning 6 million shares. Michigan Investment Board: Michigan has become a prominent owner of the ARK 21Shares Bitcoin ETF (ARKB) and joined the Bitcoin ETF trend with an allocation of around $7 million. Though relatively small, this investment reflects a cautious but clear move to gain Bitcoin exposure through regulated financial instruments that meet the compliance parameters of large public funds. Houston Firefighters Relief and Retirement Fund: One of the oldest public pension funds to experiment with Crypto, one of the oldest public pension funds to deduct Houston Firefighters Relief and Retirement Relief and Boring Relief Relief (NYDIG), even before ETF approval. The move, although modest, demonstrated an early recognition of the potential for asymmetric returns for Bitcoin and its association in modern portfolio theory, particularly for funds that manage long-term obligations.
Did you know? On June 16, 2025, ARK 21Shares Bitcoin ETF (ARKB) implemented a 3:1 share split with the aim of improving accessibility and liquidity without changing investment strategies or net asset values. This metonim move reflects growing investor demand, with Bitcoin surges above $100,000, strengthening the rationale for splits.
Tokenized and encrypted bonds
These are alternatives to the institution’s high-profile Bitcoin ETFs, such as tokenized bonds.
These are traditional bonds and money market assets issued as digital tokens on the blockchain. This innovation combines blockchain efficiency such as automated payments, transparency and programmerism with institutional grade assets.
BlackRock’s Buidl Fund: Launched in March 2024, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL) tokenizes US treasury, cash and repo contracts on blockchain platforms such as Ethereum and subsequent Solana. Within six weeks, the tokenized fund had accumulated ~$375 million in AUM, rapidly surpassing the provisions of Franklin Templeton, growing to over $1.7 billion in seven blockchains as of March 2025. Franklin Templeton’s On-Chain US Government Money Fund (FOBXX/Benji): Introduced in 2021 using Stellar and expanded to Ethereum, Avalanches, Bases, Aptos and Solana, FOBXX tokenize US Government securities, cash and repositories under UCITS regulations. By February 2025, it illustrates the first regulated tokenized money market fund in Europe with over $594 million AUM and yields of around 4.5%. Cryptoback Yield Products: Many platforms are experimenting with meticulous debt, which are collaborated by cryptocurrency bonds (e.g., Maple Finance, Open Eden), digital assets. While still in the early stages, their goal is to provide excess loan yields using blockchain and native collateral.
Challenges and considerations when incorporating Bitcoin ETFs into your financial portfolio
Bitcoin ETFs come with their own risks. This is not financial advice and requires you to do your own research.
The challenges of Bitcoin ETFs for institutions are as follows:
Volatility: Bitcoin price fluctuations are important and can pose risk to conservative investors. Regulatory uncertainty: An evolving regulatory environment can affect the performance and availability of crypto-related investment products. Rack of Yield: Unlike bonds, Bitcoin ETFs do not offer regular income. Concerns can hinder recruitment by large institutions. Bitcoin’s energy consumption, for example, remains dependent on some ESG-compliant portfolios.
Bitcoin ETFs offer attractive opportunities for institutional investors seeking diversification and growth. Although it cannot completely replace bonds in a portfolio, traditional assets can be complemented, especially in low yields or inflation environments.
A balanced approach that incorporates moderate allocations to Bitcoin ETFs can improve portfolio performance while managing risk. As the financial environment evolves, institutions must maintain agile and adapt their strategies to include emerging asset classes like Bitcoin.
