Bitcoin
Financial Advisors Still Discovering Bitcoin Spot ETFs: BlackRock CIO
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Despite the SEC’s historic approval of spot Bitcoin ETFs in January, most financial advisors are still figuring out how these new instruments will fit into their client portfolios, according to Samara Cohen, Chief Investment Officer of ETFs and Index Investing from BlackRock.
Cohen said that currently, the main buyers of spot Bitcoin ETFs are “self-directed investors” who manage their own investments through online brokerage accounts. Institutional investors such as hedge funds and brokerages are also participating, but registered investment advisors (RIAs) are adopting it cautiously.
The end result is Bitcoin’s historic price volatility, lack of a long-term track record, and customers’ risk tolerance, Cohen noted. As RIAs, their role is to be particularly diligent in risk assessment and portfolio construction, which includes understanding and evaluating new asset classes like Bitcoin.
“This is a moment, in terms of really presenting important data, risk analysis [and determining] the paper [Bitcoin] can act on a portfolio, what type of allocation is appropriate given the investor’s risk tolerance and liquidity needs”, he said Cohen at Coinbase’s State of Crypto Summit this week.
“That’s what a consultant is supposed to do, so I think this journey we’re on is exactly the right one and they’re doing their job,” she added.
For investors willing to invest in Bitcoin without having to manage risks in two different ecosystems, spot Bitcoin ETFs they are a bridge between crypto and traditional finance, according to Cohen. There were no good advances in crypto before ETFs, she said.
Based on last quarter’s 13F filings, U.S. spot Bitcoin ETFs attracted 937 professional companies in the first quarter of 2024. Among the major institutions holding Bitcoin ETF shares are Millennium Management, Morgan Stanley, JPMorgan, UBS, Wells Fargo, and the State of Wisconsin Investment Board, to name a few.
Bitcoin Adoption Could Be Key to Retaining Future Customers
Financial advisors with a traditional, conservative client base remain hesitant or even avoid recommending Bitcoin ETFs to their clients.
Neither the firm nor its clients have applied for these ETFs, says Brian Sokolowski, founder and principal of Bluebird Wealth Management in Medfield, Massachusetts. According to him, his company’s clients are mostly elderly people in their 50s and 60s who are close to retirement.
“Some of our younger clients proactively ask about crypto exposure, but for our core clientele, that’s not the priority,” he said Sokolowski.
However, the trend may change over time as younger generations influence Bitcoin acceptance and financial institutions recognize its potential to attract future customers. Intergenerational wealth transfer is among the factors that could lead to wider adoption of Bitcoin among older individuals.
Steve Cohen, the billionaire founder of hedge fund Point72 Asset Management, said in an interview with CNBC in April that he owned some Bitcoin because of his son.
Bitcoin adoption is happening, but it is “a slow journey,” according to Coinbase Chief Financial Officer Alesia Haas.
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