Bitcoin
Advisors ‘cautious’ about bitcoin ETFs are on slow adoption journey, says BlackRock exec
- Bitcoin exchange-traded funds made their debut in January, but financial advisors have been slow to adopt them.
- Financial advisors’ concerns regarding bitcoin include the cryptocurrency’s volatile prices and relatively short track record.
- Bitcoin ETFs can act as a bridge between cryptocurrency and traditional finance, according to Samara Cohen, director of ETF investing and index investing at BlackRock.
Jonathan Raa | Nurfoto | Getty Images
The long awaited Bitcoin exchange traded funds released in Januaryand financial advisors are on their way — albeit gradually — to adopting them, according to BlackRock’s Samara Cohen.
For now, about 80% of bitcoin ETF purchases likely came from “self-directed investors who made their own allocation, often through an online brokerage account,” she said, speaking at Coinbase State of Crypto Summit in New York City on Thursday. O iShares Bitcoin Trust (IBIT) was among the funds to debut earlier this year.
Cohen, director of ETF and index investments at BlackRock, noted that hedge funds and broker-dealers have also been buyers, based on last quarter’s 13-F filings, but registered investment advisors have been a bit more “cautious.” ”.
CNBC recently interviewed its Advisory Board about why they and their colleagues are so cautious about the new products, which represent a familiar, regulated investment product for a new asset class that has generated significant interest in recent years. Responses ranged from bitcoin’s notorious price volatility to the leading cryptocurrency being too nascent to have established a significant track record. Regulatory compliance and crypto’s reputation for fraud and scandal were also on advisors’ minds.
“I would call them cautious…that’s their job,” Cohen said of skeptical financial advisors.
“An investment advisor is a fiduciary to his or her clients,” she added. “This is an asset class that has had 90% price volatility at some points in history, and their job is to actually build portfolios and do the risk analysis and due diligence. They’re doing that now.”
See the graph…
The iShares Bitcoin Trust (IBIT) in 2024
“This is a moment, in terms of really presenting important data, risk analysis [and determining] the role that bitcoin can play in a portfolio, what kind of allocation is appropriate given an investor’s risk tolerance, their liquidity needs,” she added. “That’s what an advisor should do, so I think this journey where we are is exactly the right path and they are doing their job.”
Cohen said he sees bitcoin ETFs as a bridge between crypto and traditional finance – especially for investors who might be interested in making an allocation to bitcoin without having to manage their risk in two different ecosystems. Before ETFs, the existing on-ramps for crypto were insufficient for what some investors wanted to do, she said.
Coinbase Chief Financial Officer Alesia Haas said bitcoin is “on a slow adoption journey” – a theme that echoed throughout the conference sessions.
Blue Macellari, head of digital asset strategy at T. Rowe Price, pointed to the 1% allocation which some investors consider a safe and comfortable amount. She said she sees portfolio allocations in bitcoin as binary events, where they should be greater than 1% or zero, but also acknowledged the cautious approach to adoption.
“There is a psychological component where people need to test the waters and feel comfortable,” Macellari said. “It’s a paradigm shift… it takes time for people to ease their way.”