Research Study
Channels for Exposure to Bitcoin
The benefits and challenges of the channels institutional investors may consider to make an allocation to bitcoin
by Jack Neureuter and Yassinie Elmandjra
July 16, 2021 • 17 min read
Introduction
To date, much of the discussion in the institutional investor community has focused on “why bitcoin?” If one does arrive at the conclusion that bitcoin is appropriate for their portfolio, often the next logical question is “how” to gain exposure. In this piece, we will discuss the benefits and considerations of different channels for exposure, including third-party custody, passive single-asset funds, futures contracts, and actively managed funds.
A core feature of bitcoin (and digital assets broadly) is the ability for holders to self-custody the assets and establish ownership in the truest sense, removing the need to trust intermediaries that enforce control over the assets. However, many institutions that have fiduciary obligations face regulatory and operational limitations that prevent them from taking direct custody of the assets. Additionally, as it stands, self-custody requires robust security and risk management processes that certain institutions may not feel comfortable taking on or may not have the time and resources to build out.
Benefits and Considerations
To accommodate for this reality, the channels for exposure to bitcoin have expanded significantly as institutional interest in the asset has grown. In this piece, we focus on the benefits and challenges of multiple channels institutional investors may consider after deciding they should make an allocation to the asset class.
In January 2024, we published an updated piece to this report: Channels for Exposure to Bitcoin Revisited.
In this newer version, we discuss the potential benefits and considerations of different channels for bitcoin exposure, including third-party custody, passive single-asset funds, futures contracts, actively managed funds, futures-based exchange traded funds, and most recently, spot exchange-traded products.
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