Bitcoin OGs Made RECORD Profits - Wall Street Paid Them

Bitcoin long-term holders had their most profitable cycle ever, with unrealized profits nearly tripling the 2021 peak. Unlike prior cycles where retail traders served as exit liquidity, this time ETFs and digital asset treasury companies absorbed the supply, allowing Bitcoin OGs to sell above 100,000 and continue realizing gains on the way down. Altcoins did not participate in this cycle the way they did in previous ones, and Bitcoin is characterized as trading at roughly half off relative to what ETF inflows would have implied.

Seven-day Bitcoin volatility is now around 20 and thirty-day volatility around 25, both below the S&P 500. The constant bid from ETFs and digital asset treasury companies is credited as the structural force behind this compression. Traditional institutions such as pensions and endowment foundations have not yet entered in any meaningful way, meaning the volatility suppression arrived before the largest pools of capital have even begun allocating.

The current downturn is harder to explain than prior crypto winters, which had identifiable catalysts including FTX, Voyager, Celsius, BlockFi, and Terra Luna. Positive macro conditions, summer seasonality, and market apathy are cited alongside the institutional bid as contributing factors to dampened volatility. Legislative uncertainty has also acted as a brake on institutional capital. The Clarity Act is not expected to pass in the current legislative cycle and may be pushed to September, but now that it has stalled, the SEC and CFTC chairs are expected to move toward rulemaking. If good rulemaking is achieved, the industry has roughly two and a half to three years to make crypto too big to fail and irreversible regardless of midterm election outcomes.

Goldman Sachs is acquiring NEOs, which has approximately 30 billion in AUM and roughly 1.1 billion in Bitcoin-specific assets, in a deal valued at up to 2.25 billion dollars. Goldman had previously announced plans to launch a covered call Bitcoin ETP and then went quiet, and the NEOs acquisition is now understood to be how they executed that strategy. BlackRock launched a Bitcoin income ETF that captures yield while limiting upside by roughly 20 to 30 percent on large Bitcoin moves, and the Goldman covered call product acquired through NEOs is suspected to be larger than BlackRock's equivalent offering. JP Morgan's covered call complex in equities is estimated at 30 to 40 billion dollars, providing a reference point for the potential scale of the category in Bitcoin. Fidelity added staking to its Ethereum ETF with up to 100 percent of fund assets eligible to be staked, retaining 85 percent of gross staking rewards for the fund. Morgan Stanley also launched Solana and Ethereum ETPs incorporating staking.

Wealth management platforms took approximately 12 to 18 months after the January 2024 ETF approvals to even approve Bitcoin ETF products, and approval does not mean active allocation. Advisors must first receive unsolicited client inquiries before they can have a solicited conversation, and products must then be added to models and house recommended lists, none of which has happened at scale. Before the ETF launch, advisors recommending Bitcoin risked career damage, causing them to ignore digital assets entirely, and those who were educated early by firms like Bitwise and Grayscale had no compliant vehicle to act on that knowledge until the ETF existed. Bitcoin ETF adoption inside wealth management is described as being in the first inning on the retail advisor side and not yet having started on the institutional side.

Morgan Stanley is cited as a concrete example of a major firm moving toward digital asset integration, with its index underpinning Bitcoin, Solana, and Ethereum ETFs. Morgan Stanley believes tens of billions in Bitcoin held by its own clients have not yet migrated onto its wealth management platform, representing a large pool of appreciated spot Bitcoin that firms are actively trying to pull in. BlackRock lowered the minimum threshold for tax-free conversion from spot Bitcoin into its IBIT ETF from 25 million dollars to 1 million dollars, meaningfully expanding access for a broader range of holders looking to transition into the ETF structure.

The entire Bitcoin ETP complex first crossed 100 billion dollars when Bitcoin was trading at 120,000 and currently sits at roughly 80 to 90 billion dollars at approximately half that prior peak price. If Bitcoin returns to the 100,000 to 120,000 range, the ETP complex could reach 200 billion dollars, driven by a share base that is growing and will compound as price rises. The parallel drawn is to the gold ETF launched in 2004, where gold bugs initially refused to own it but now universally hold the gold ETP, with Bitcoin ETFs expected to follow the same trajectory and eventually become a standard portfolio building block regardless of current resistance from spot Bitcoin holders.