Bitcoin ETFs Are Here, but Financial Advisors Are Taking a Wait-and-See Approach

The long-awaited bitcoin exchange-traded funds launched in January, and financial advisors are on their way – though gradually – toward adopting them

Bitcoin exchange-traded funds launched earlier this year, and financial advisors are slowly adopting them, according to BlackRock’s (BLK) head of ETF and index investments.

“We're seeing the bitcoin ETF trades coming in, predominantly, at least for now, 80 per cent of it, seems to be self-directed investors who have made their own allocation, often through an online brokerage account,” said Samara Cohen, speaking at the Coinbase State of Crypto Summit in New York City on Thursday.

The iShares Bitcoin Trust (IBIT) was among the bitcoin ETFs to debut earlier this year.

“We do see some hedge funds and brokerages buying, based on the 13-F filings last quarter, but registered investment advisors are being a little more wary,” said Cohen, whose role spans BlackRock’s ETF and index investment strategies.

CNBC recently polled its Advisor Council about why they and their colleagues are being cautious about the new products, which represent a familiar and regulated investment product for a new asset class that has attracted interest. Responses ranged from bitcoin’s well-known price volatility to the flagship cryptocurrency being too new to have established a substantial track record.

Regulatory compliance and the crypto’s reputation for fraud and scandal were also top-of-mind for advisors.

“I would call them wary … that's their job,” said Cohen, speaking of the skeptical financial advisors.

“An investment advisor is a fiduciary to their clients. This is an asset class that has had, at times in history, 90 per cent price volatility, and their job is really to construct portfolios and do the risk analysis and due diligence. They're doing that right now.”

“This is a moment, in terms of really putting forward important data, risk analytics [and determining] the role bitcoin can play in a portfolio, what sort of allocation is appropriate given an investor's risk tolerance, their liquidity needs,” she added. “That's what an advisor is supposed to do, so I think this journey that we're on is exactly the right one and they're doing their jobs.”

Cohen said she views bitcoin ETFs as a bridge between crypto and traditional finance — especially for investors who may be interested in making an allocation to bitcoin without having to manage their risk across two different ecosystems. Before the ETFs, the existing onramps into crypto were insufficient for what some investors wanted to do, she added.

“Bitcoin is on a slow journey of adoption,” said Coinbase (COIN) chief financial officer Alesia Haas, a theme that played out in discussions across conference sessions.

Blue Macellari, head of digital assets strategy for T. Rowe Price, pointed to the 1 per cent allocation that some investors view as a comfortable, safe amount. She said she sees portfolio allocations into bitcoin as binary events, where they should be greater than 1 per cent or zero, but she also noted the caution in adoption.

“There's a psychological component where people need to test the waters and get comfortable. It's a paradigm shift … it takes time for people to ease their way into it,” said Macellari.

News source：https://www.kdj.com/cryptocurrencies-news/articles/bitcoin-etfs-financial-advisors-wait-approach.html

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