ETFs
Advisors Concerned About Slow Adoption of Bitcoin ETFs
The long-awaited Bitcoin exchange-traded funds launched in January and financial advisors are close – albeit gradually – to adopting them, according to BlackRock’s Samara Cohen.
For now, about 80% of Bitcoin ETF purchases likely come from “self-directed investors who have made their own allocation, often through an online brokerage account,” she said at Coinbase State of Crypto Summit in New York. City Thursday. The iShares Bitcoin Trust (IBIT) was among the funds launched earlier this year.
Cohen, BlackRock’s chief investment officer for ETF and index investing, noted that hedge funds and brokerages have also been buyers, based on last quarter’s 13-F filings, but that registered investment advisers were a little more “suspicious”.
CNBC recently interviewed its advisory board about why they and their colleagues are so cautious about the new products, which represent a regulated and familiar investment product for a new asset class that has generated considerable interest these last years. The answers ranged from bitcoin’s notorious price volatility to the flagship cryptocurrency being too nascent to have established a meaningful history.
Regulatory compliance and crypto’s reputation for fraud and scandal were also on advisors’ minds.
“I would call them suspicious…that’s their job,” Cohen said of skeptical financial advisors.
“An investment advisor is a fiduciary to their clients,” she added. “This is an asset class whose prices have seen 90% volatility at times in history, and their job is really to build portfolios and do the risk analysis and due diligence. They’re doing it right now.
“This is the time to really highlight important data and risk analyses. [and determining] the role Bitcoin can play in a portfolio, what type of allocation is appropriate given an investor’s risk tolerance and liquidity needs,” she added. “That’s what an advisor is supposed to do, so I think the journey we’re taking is exactly the right one and they’re doing their job.”
Cohen said she sees Bitcoin ETFs as a bridge between crypto and traditional finance – particularly for investors who might be interested in an allocation to Bitcoin without having to manage their risks in two different ecosystems. Before ETFs, existing on-ramps into crypto were insufficient for what some investors wanted to do, she said.
Alesia Haas, Coinbase’s chief financial officer, said bitcoin was “on a slow path to adoption” – a theme echoed during the conference sessions.
Blue Macellari, head of digital asset strategy at T. Rowe Price, highlighted the 1% allocation that some investors consider a safe and comfortable amount. She said she views portfolio allocations in Bitcoin as binary events, where they should be greater than 1% or zero, but she also acknowledged the cautious approach to adoption.
“There is a psychological component where people have to test the waters and feel comfortable,” Macellari said. “It’s a paradigm shift… it takes time for people to adjust to it.”