The Abu Dhabi Investment Council more than tripled its holdings in a Bitcoin exchange-traded fund during the third quarter, just before a sharp collapse in the cryptocurrency market ended a strong rally.
The council, which is an independent unit run separately from the sovereign wealth fund Mubadala Investment Company, increased its holdings in BlackRock's iShares Bitcoin Trust to about 8 million shares as of September 30, according to a regulatory filing.
The value of this holding, disclosed by a subsidiary of the council, was approximately $518 million at the time, up from 2.4 million shares just 3 months earlier.
Bitcoin's price hit a record high of $126,251 in early October, driven in part by massive inflows into exchange-traded funds (ETFs) like the iShares Bitcoin Trust, by far the world's largest cryptocurrency ETF with assets exceeding $70 billion. However, the market experienced a rapid collapse due to the liquidation of billions of dollars in debt-backed bets, sending Bitcoin's price plummeting below $92,000.
Abu Dhabi Investment Council Strategy
These disclosures offer a rare and detailed glimpse into the strategy of the Abu Dhabi Investment Council, which focuses primarily on private assets in areas such as acquisitions, infrastructure and real estate.
A representative from the council stated that they allocate a small portion of their portfolio to invest in Bitcoin as part of a long-term diversification strategy.
In response to Bloomberg's inquiries, a spokesperson for the council stated: We view Bitcoin as a store of value similar to gold, and as the world continues its shift towards a more digital future, we see Bitcoin playing an increasingly important role alongside gold . The spokesperson added: Both assets contribute to diversifying our investment portfolio, and we expect to maintain them as part of our strategy in both the short and long term.
Record capital outflow
Mubadala separately disclosed that it owns 8.7 million shares in the same Bitcoin fund – known by the trading symbol IBIT – worth $567 million as of the end of the third quarter, the same holding it had three months earlier.
No immediate details were available on purchase prices, but iBit, which tracks Bitcoin's value, has lost about a fifth of its value since September 30, following gains of 6.2% in the third quarter. It traded at a volume-weighted average price of $64.52 during the quarter, according to Bloomberg data.
The Abu Dhabi Investment Council was not the only one to increase its holdings during the last quarter, as Harvard Management also increased its investment in IBET during the same period.
But as market trends shifted, investors began to withdraw. So far in November, approximately $3.1 billion has been withdrawn from a group of 12 US-listed Bitcoin spot funds, including iBit, according to Bloomberg data.
iBit recorded record outflows of $523 million on Tuesday, after Bitcoin fell below a key price level, leading to losses among ordinary investors in US exchange-traded funds that track the currency.
The importance of Abu Dhabi's moves in the market
Abu Dhabi’s moves in this sector are of particular importance given the size of its financial resources, with its sovereign wealth funds overseeing more than $1.7 trillion, and Mubadala has already been a key driver in the emirate’s emergence as a global cryptocurrency hub in recent years.
Earlier this year, a technology investment firm established by the $330 billion sovereign wealth fund acquired a $2 billion stake in the cryptocurrency exchange Binance. The fund, known as MGX, completed the transaction using a stablecoin issued by a company linked to the family of US President Donald Trump.
Although Mubadala incorporated the Abu Dhabi Investment Council years ago, the two funds still operate separately. The council, established in 2007, is expanding its top executive team as it seeks to increase its global investments.
long-term strategy
The board recently appointed Alan Carrier, former CEO of private markets firm Bregal Investments, as executive director of its private equity division. Prior to Bregal, Carrier served as head of international business for the Canada Pension Plan Investment Board.
The council also recruited Ben Smald, formerly chief investment officer of Australia’s A$252 billion (US$164 billion) sovereign wealth fund, to serve as the council’s chief strategist.
The Abu Dhabi Investment Council employs an endowment-based investment model, primarily focused on private assets, particularly in North America. Its recent actions indicate that global institutions, and even governments, continue to engage with cryptocurrency assets despite the sector's well-known volatility.
Government support for Bitcoin
In this context, El Salvador's President Nayib Bukele, one of the earliest supporters of cryptocurrencies, announced that Bitcoin would be made legal tender in the country in 2021. El Salvador added more than $100 million to its Bitcoin holdings this week.
The Czech central bank also announced last week its first-ever purchase of cryptocurrencies, as part of its efforts to assess whether digital assets can contribute to diversifying its reserves. The bank stated that its $1 million investment would be held separately from its official foreign reserves.
Earlier in November, Kazakhstan’s central bank governor, Timur Suleimanov, told Bloomberg that the country was working to create a national cryptocurrency reserve fund that could be worth up to $1 billion, partly using assets that had been confiscated and repatriated from abroad.
