Bitcoin
Advisors Cautious About Bitcoin ETF Adoption: BlackRock Executive
BlackRock’s chief investment officer for ETF and index investing, Samara Cohen, hinted that financial advisors remain “cautious” about adopting spot Bitcoin (Bitcoin) exchange-traded funds (ETFs), despite the success recorded by the investment vehicle.
Despite attracting more than $50 billion in investments since they were launched in January 2024, Bitcoin ETFs still face slow acceptance among financial advisors.
According to For Cohen, approximately 80% of Bitcoin ETF purchases originate from autonomous investors who made their own allocation through an online brokerage account.
Cohen highlighted that financial advisors remain cautious about jumping on the spot Bitcoin ETF bandwagon due to their fiduciary responsibilities to clients.
Given Bitcoin’s history of significant price volatility, advisors are rigorously analyzing its role in portfolios and determining appropriate allocations based on the investor’s risk tolerance and liquidity needs.
She emphasized that this process of data evaluation and risk analysis is crucial for consultants to carry out their roles effectively amid ongoing market uncertainty.
The leading cryptocurrency has undergone significant fluctuations over time, posing a substantial risk to potential investors. Additionally, the relatively brief history of Bitcoin ETFs contributes to financial advisors’ skepticism, as the limited track record raises doubts about their reliability and long-term performance, she notes.
Another significant impediment is the regulatory landscape. The financial sector continues to struggle to establish a clear regulatory framework for cryptocurrencies, which introduces uncertainty and caution among financial advisors. The absence of definitive guidelines and the possibility of regulatory adjustments further complicate recommending Bitcoin ETFs to clients.
Despite these challenges, Bitcoin ETFs hold promise as a conduit between cryptocurrency and conventional finance. They offer a regulated and more accessible path for investors to participate in the cryptocurrency market.
However, slow uptake among financial advisors highlights the need for better education and awareness to overcome existing barriers.
Regulatory changes
The U.S. Securities and Exchange Commission’s (SEC) approval of Bitcoin ETFs has had a profound impact impact in the cryptocurrency market, especially with issuers like ARK and 21Shares.
Prominent Issuers That Secured Bitcoin ETF approvals are now seeking the same for Ethereum (ETH). This development has caught the attention of investors as they seek exposure to the second-largest cryptocurrency in terms of market capitalization.
However, the SEC expressed caution amid this enthusiasm. SEC Chairman Gary Gensler emphasized that most crypto assets are viewed as investment contracts and therefore fall under federal securities laws.
This stance diverges from the SEC’s previous approach, which focused primarily on the commodities and futures aspects of cryptocurrencies.
This regulatory classification adds complexity to the approval process for Ethereum ETFs, which operate on a different protocol than Bitcoin.
Still, Gensler wait fully approve spot Ether ETFs by the end of summer 2024.
The SEC had already given initial information approval to a group of ETFs, and final registration requirements, known as S-1 filings, are currently being processed by staff. Once these registrations are approved, the new ETFs can be listed, providing the market with easy-to-trade funds containing real Ether, similar to previously established Bitcoin spot ETFs.
During a budget hearing before the Senate Appropriations Committee, Gensler highlighted the smooth running of the registration process for these ETFs. He noted that individual issuers are moving diligently through the registration stages, proceeding efficiently.