Bitcoin A Crowded Trade?

In this edition of ChartCritic, we look at a chart from the latest BofA Merrill Lynch Global Fund Manager Survey. The chart shows the survey respondents’ perceptions of what is currently the most crowded trade.  At the top of the list is controversial, loved by some, hated by others, ignored by many: Bitcoin.  It is an interesting result and chart for two reasons: first, it is likely that the overwhelming majority, if not all, of the survey respondents, are either not invested or not able to invest their funds in cryptocurrencies like Bitcoin (most traditional pension fund trustees/investment committees would balk). Second, it is quite a subjective question… more their perception of what they think is the most crowded trade.

Still, it provides interesting food for thought on BTC, and it shows Bitcoin out ahead of some other popular crowded trades – and most of those other assets have long and well-established data on positioning and flows, which makes it easier and more objective to define a crowded trade.

Anyway, here comes the part where we add our own charts and thoughts into the mix.  First is a small survey I took which asks folk on Twitter whether they have any allocation to cryptocurrency/Bitcoin and whether they are institutional or individual investors.  The results show of the respondents: 14% of institutional investors had an allocation to cryptocurrencies or Bitcoin, and 30% of individuals did.  Oddly enough the results suggest at least 1/10 institutional investors have invested in Bitcoin (not sure if that is accurate or representative!), and about 1/3 individual investors are on the Bitcoin bandwagon.

Final chart compares the market cap of Bitcoin to the total assets in US mutual funds and ETFs, which comes up with an implied asset allocation of around 35bps (0.35%).  While still small in the scheme of things, it’s actually not that far off from reaching half-of-1% implied asset allocation.  This still trails behind cash allocations which are about 16% (based on the AAII survey and implied allocations from ICI stats)