BlackRock's chief investment officer for ETFs and index investments, Samara Cohen, hinted that financial advisors remain “wary” of adopting Bitcoin (BTC) exchange-traded funds (ETFs) despite the success of the investment vehicle.
Despite attracting more than $50 billion in investments since their launch in January 2024, Bitcoin ETFs are still facing a slowdown in uptake among financial advisors.
According to According to Cohen, roughly 80% of Bitcoin ETF purchases come from self-investors who have set aside their own money through an online brokerage account.
Cohen highlighted that financial advisors remain wary of jumping on the spot Bitcoin ETF bandwagon due to their fiduciary responsibilities to clients.
Given Bitcoin's history of significant price fluctuations, advisors carefully analyze its role in portfolios and determine appropriate allocations based on the investor's risk tolerance and liquidity needs.
She stressed that this process of data evaluation and risk analyzes is crucial for advisors to effectively fulfill their duties amid the ongoing market uncertainty.
The major cryptocurrency has seen significant volatility over time, posing a significant risk to potential investors. Moreover, the relatively short 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 important deterrent is the regulatory landscape. The financial sector continues to struggle to create a clear regulatory framework for cryptocurrencies, leading to uncertainty and caution among financial advisors. The absence of final guidelines and the possibility of regulatory amendments further complicates the recommendation of Bitcoin ETFs to clients.
Despite these challenges, Bitcoin ETFs show promise as a conduit between cryptocurrency and traditional finance. They provide a regulated and more accessible way for investors to participate in the cryptocurrency market.
However, slow acceptance among financial advisors highlights the need for enhanced education and awareness to overcome existing barriers.
Organizational transformations
The SEC's approval of Bitcoin ETFs has had a profound impact on the cryptocurrency market, especially with issuers like ARK and 21Shares.
Prominent issuers that have received Bitcoin ETF approvals are now seeking the same for Ethereum (ETH). This development has captured the attention of investors as they seek exposure to the second-largest cryptocurrency by market capitalization.
However, the SEC expressed caution amid the enthusiasm. SEC Chairman Gary Gensler emphasized that most crypto assets are viewed as investment contracts and therefore fall under these contracts. Federal securities laws.
This position is a departure 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 compared to Bitcoin.
However, Gensler expects full approval for Ethereum ETFs by the end of summer 2024.
The SEC had previously granted preliminary approval to a group of ETFs, and final registration requirements, known as S-1 filings, are currently being processed at the staff level. Once these deposits are approved, new ETFs can be listed, providing the market with easy-to-trade funds containing physical Ethereum, similar to previously created Bitcoin spot ETFs.
During a budget hearing before the Senate Appropriations Committee, Gensler Highlight Smooth progress in the registration process for these ETFs. He pointed out that individual exporters are progressing diligently during the registration stages and working efficiently.