US Acceptance of Cryptocurrencies from Millions of SEC Filings

Coin Metrics, an on-chain data service provider, recently examined the evolution of cryptocurrency acceptance by U.S. entities by searching millions of U.S. SEC documents for mentions of cryptocurrency-related terms.

Bitcoin is venture capital for the first time in a SEC filing: STARTING A BITCOIN VENTURE. The term appeared in a June 2011 supplement to a loan application filed by peer-to-peer lending firm Prosper Marketplace, which detailed a California computer programmer’s plan to use a $7,000 loan to invest in bitcoin, build a computer to mine bitcoin, and Rent an office to build a physical BTC/USD exchange.

Since then, 2,169 filing entities have mentioned Bitcoin in 11,510 SEC filings. Other agencies, such as public companies and investment funds in the U.S., have long filed documents with the Securities and Exchange Commission reporting financial performance (e.g., quarterly and annual updates in 10-Q and 10-K filings) and information on future plans and other financial metrics Information. 

These documents run in the millions, providing researchers, economists, investors and others with a wealth of data. Like the first-ever filing to mention Bitcoin, the SEC filing can serve as useful alternative data to analyze trends in investment interest and cryptoasset adoption. 

The number of documents mentioning encryption is increasing as more institutions and crypto companies (from exchanges to bitcoin miners) receive debt and equity financing from the open market. In this week’s SOTN (State of the Network), we are in the SEC’s EDGAR database (Note: Electronic Data Gathering, Analysis, and Retrieval system, Electronic Data Gathering, Analysis and Retrieval System, 1996 US SEC regulations all information disclosure obligors are required to file electronically) mining crypto-related terms, looking for signs of institutional interest, and more.

Initial data analysis

The SEC provides a “full text search” tool that allows users to search EDGAR for documents that contain a case-insensitive text string within a specific time frame, for example, all documents that mention “B(b)itcoin” in the past 30 days. This covers all document types from prospectuses to earnings announcements and company presentations.

The graph below shows the monthly number of documents mentioning Bitcoin versus BTC price.

FWi7El9JoPHlab6RFLP8tXKgTGOfyWHiV9OIRA2K.pngThe number of mentions has only followed historical price cycles and has risen during bull markets. Before 2017, Bitcoin was mentioned less, until after the acceleration of Bitcoin in 2017, Bitcoin mentions began to increase. Mentions remained flat again before the BTC price started to rise in 2020/21, followed by a sharp increase in mentions. 

A similar trend is evident for other crypto-related terms. Below is the monthly number of applications mentioning “Ethereum” and “Blockchain”, which increased significantly in 2018 and 2021.

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entity-level data

The number of entities referring to Bitcoin is useful, but a rather rough proxy. Once a company starts mentioning Bitcoin (e.g. Bitcoin miners), they may continue to mention it or mention it everywhere in every document (e.g. in disclaimers, business descriptions).

Another way to mine the data is to look at the number of unique entities mentioning crypto-related terms. Entities include bitcoin mining firm Riot Blockchain (RIOT), asset management firm Grayscale, and non-crypto-specialized companies such as Tesla (TSLA) or Microstrategy (MSTR), which hold BTC on their balance sheets.

The number of unique entities mentioning crypto terms has increased since 2020, reflecting the broader trend of cryptocurrencies entering institutions. Bitcoin miners also accounted for a large portion of the growth. There are now over 40 Bitcoin mining companies listed on US and Canadian exchanges.

gyDZc04UwqZYL9wRzVwW9P7xhoHwor0dBkCaieTu.pngi3QndDLvCkSuw9MfKsHjrlxu6jrVoRvu0bkLWfBq.png

Measuring Institutional Interest in 13F Documents

Decoding institutions from retail interest is a particularly challenging problem in crypto research. A rough proxy is to look at the number of addresses on-chain holding relatively large amounts of native assets. Heading into 2021, the number of addresses holding high BTC and ETH balances increased, consistent with rumors that institutional interest was picking up at the time. However, this trend appears to be broken in the second half of 2021.

dNFxteAqV0grS4sjbOD6kmw42gyFJuqbF0jLeKA7.png

Source: Coin Metrics’s Formula Builder

Certain types of SEC filings can also be used to gauge institutional interest in cryptoassets. Most investment funds that operate and conduct business in the United States and have assets under management (AUM) of at least $100 million are required to file 13F filings, disclosing each fund’s holdings to the public on a quarterly basis. However, only a subset of the fund’s investments need to be reported, and any positions in spot BTC and other spot commodities and currencies that are not considered 13(f) securities need not be reported. However, crypto-related investment vehicles such as trusts are often disclosed.

The chart below shows the number of 13F documents mentioning Bitcoin, which increased in early 2021 but declined in the second and third quarters of last year, in line with on-chain data.

jehYcEEfjN2aHAxGsAUvpRK3ixxb25Bj4T5W7AHW.png

To date, a popular way for institutions to gain exposure to BTC is through trusts such as Grayscale’s Bitcoin Trust (GBTC), the largest trust by net asset value (NAV), currently holding around 643,000 BTC, worth about $27 billion. GBTC’s BTC holdings have steadily increased with the number of investment funds that mentioned BTC in the 2020-2021 13F document.

j1iSji4shrT6awm9M9N1lDsJuRULGSH9ZtAkC2A8.pngWhile GBTC holdings have been flat since early 2021, the 13F filing mentioning Bitcoin accelerated towards the end of 2021. This reflects the launch of the first (futures-based) BTC ETF products in the US in October 2021, including the Bitcoin Strategy ETF (BITO) by ProShares and the Bitcoin Strategy ETF (BTF) by Valkyrie, both held in BTC futures contracts traded on CME. These funds are now reported in the 13F filing, partly explaining the increase in unique entities.

A similar trend has been seen in Ethereum from 2020 to 2021, reflecting the growing institutional interest in Ethereum. However, the U.S. has yet to approve any Ethereum ETFs, with the trust becoming the main investment vehicle.

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in conclusion

Looking at public SEC filings can be a useful way to gauge the growing presence of cryptocurrencies in the U.S. economy. Periodic reports are often viewed as an important part of financial markets assessing performance and analyzing other disclosures. While it will be useful to continue to follow new information in future documents, it is worth noting that more granular updates can be achieved with public chains. Encrypted data is ushering in a new era of effective real-time economic insights driven by on-chain data, a topic we have discussed before and will expand on in the future.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/us-acceptance-of-cryptocurrencies-from-millions-of-sec-filings/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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