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Advisors ‘wary’ of bitcoin ETFs are moving slowly towards adoption, BlackRock executive says
- Bitcoin exchange-traded funds made their debut in January, but financial advisors have been slow to adopt them.
- Financial advisors’ concerns about bitcoin include the cryptocurrency’s volatile prices and its relatively short track record.
- Bitcoin ETFs can serve as a bridge between cryptocurrency and traditional finance, according to Samara Cohen, chief investment officer of ETFs and index investing at BlackRock.
Jonathan Raa | Nurphoto | Getty Images
The long awaited bitcoin exchange-traded funds launched in Januaryand financial advisors are on track, albeit gradually, to adopt 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,” he said, speaking at Coinbase State of Cryptocurrency Summit in New York on Thursday. THE iShares Bitcoin Trust (IBIT) it was among the funds to debut earlier this year.
Cohen, BlackRock’s chief investment officer of ETF and index investing, noted that hedge funds and brokerages have also been buyers, based on last quarter’s 13-F filings, but registered investment advisors have been a bit more “distrustful”.
CNBC recently interviewed its Advisory Council about why they and their peers are so wary of the new products, which represent a regulated and familiar investment product for a new asset class that has garnered considerable interest in recent years. Responses ranged from bitcoin’s infamous price volatility to the fact that the flagship cryptocurrency was too nascent to have established a significant track record. Regulatory compliance and cryptocurrency’s reputation for fraud and scandal were also on advisors’ minds.
“I would call them distrustful … that’s their job,” Cohen said of skeptical financial advisors.
“An investment advisor is a fiduciary for their clients,” he added. “This is an asset class that has had 90% price volatility at some points in history, and their job is really to build portfolios and do risk analysis and due diligence. They’re doing that right now.”
See graph…
The iShares Bitcoin Trust (IBIT) in 2024
“This is a moment, in terms of presenting really important data, risk analysis [and determining] the role bitcoin can play in a portfolio, what kind of allocation is appropriate given an investor’s risk tolerance, their liquidity needs,” he added. “This is what an advisor should do, so I think this journey we’re on is exactly the right one and they’re doing their job.”
Cohen said he sees bitcoin ETFs as a bridge between cryptocurrencies and traditional finance, particularly for investors who may be interested in investing in bitcoin without having to manage their risk in two different ecosystems. Before ETFs, existing paths to cryptocurrencies weren’t sufficient for what some investors wanted to do, he said.
Coinbase Chief Financial Officer Alesia Haas said bitcoin is “on a slow journey to adoption” — a theme echoed throughout the conference sessions.
Blue Macellari, head of digital asset strategy at T. Rowe Price, pointed out 1% allocation. which some investors consider a safe and comfortable amount. He said he views bitcoin portfolio allocations as binary events, where they should be above 1% or zero, but also acknowledged the cautious approach to adoption.
“There is a psychological component where people need to test the waters and get comfortable,” Macellari said. “It’s a paradigm shift… it takes time for people to warm up to it.”