Peter Thiel’s Founders Fund bought $200M BTC, ETH before institutions dived into Bitcoin ETFs

Institutional investors are beginning to experience soaring demand for Bitcoin as spot exchange-traded funds open up the asset class to the wider financial system.

Institutional investment into Bitcoin and cryptocurrencies continues to make headlines, with Peter Thiel’s Founders Fund reportedly pumping $200 million into BTC and Ether in 2023.

According to a Reuters report citing sources with intimate knowledge of the venture capital (VC) fund’s cryptocurrency investment move, Thiel’s firm invested $100 million in Bitcoin (BTC) and Ether (ETH), respectively, as talk of a pending spot Bitcoin exchange-traded fund (ETF) approval ramped in the United States in 2023.

Related: Bitcoin trades above $50K again — but it’s very different this time

Founders Fund has a long history of Bitcoin investing, with Reuters reporting the firm has been acquiring BTC since 2014. Cointelegraph previously reported on another BTC investment made by the fund in 2018. Founders Fund made over $1.8 billion when it liquidated its BTC holdings  in 2022.

While VCs and hedge funds like Founders Fund have been able to buy BTC directly on the open market, major financial institutions and funds have had to wait for spot Bitcoin ETFs to gain exposure to the asset class.

Bitcoin hits $50,000 as ETF inflows reach $2.8 billion

The price of Bitcoin surpassed $50,000 on Feb. 12, reaching a milestone it last traded at in December 2021. Market analysts and industry commentators have highlighted the impact of Bitcoin ETFs on the surging price of BTC in recent weeks.

Spot Bitcoin ETFs attracted over $1.1 billion in inflows in early February as outflows from the Grayscale Bitcoin Trust continued to slow. According to a Feb. 12 CoinShares report, Bitcoin ETFs have attracted $2.8 billion of capital inflows since they started trading on Jan. 11.

Bitcoin ETFs have more Bitcoin than MicroStrategy

Analysts at Bitfinex highlighted that Bitcoin ETFs, excluding Grayscale’s GBTC, hold over 192,000 BTC, bringing the total assets under management to $59 billion, the highest since early 2022.

The latest Bitfinex Alpha report also notes that the combined holdings of Bitcoin ETFs and MicroStrategy account for 1.8% of the total Bitcoin supply that will ever exist. While the value of the BTC held is significant, it suggests that the holdings pose “no significant threat to the decentralized nature of the Bitcoin network.”

#Bitcoin is the world’s most popular investment asset. It is novel, digital, global, unique, and uncorrelated to traditional risk assets. That makes it a natural addition to the portfolio of a responsible investor. pic.twitter.com/ZOEVkKDh0T

— Michael Saylor⚡️ (@saylor) February 12, 2024

MicroStrategy founder Michael Saylor, who spearheaded the software company’s move to convert its treasury holdings into Bitcoin in 2020, told CNBC on Feb. 13 that Bitcoin is becoming an increasingly attractive asset in an investment portfolio:

“Bitcoin is the world’s most popular investment asset. It is novel, digital, global, unique and uncorrelated to traditional risk assets. That makes it a natural addition to the portfolio of a responsible investor.”

Saylor added that there is “10 years of pent-up demand” for Bitcoin from institutional investors that can finally gain exposure to the digital asset through Bitcoin ETFs in the United States. He highlighted what he observed as a rebalancing, with investors moving capital between the futures markets, the miners, MicroStrategy and the ETFs.

Related: Bitcoin ETFs are sucking up 10X more BTC than miners can produce

“Following that, I think the asset has found its footing, and people are beginning to realize that there’s 10 times as much demand for BTC coming in through these ETFs as there is supply coming from the natural sellers, which are miners,” Saylor explained.

Market analysts also noted drastically different macroeconomic factors as Bitcoin surpassed $50,000 for the first time in two years. The Bitcoin halving and Bitcoin ETF approval in the U.S. are major focal points, according to eToro market analyst Josh Gilbert.