- BlackRock’s Samara Cohen comments on the hesitant adoption of spot Bitcoin (BTC) exchange-traded funds (ETFs) by registered investment advisors (RIAs).
- Cohen, BlackRock’s CIO of ETF and Index Investments, highlights that around 80% of Bitcoin ETF investments are made by self-directed investors.
- She remarks that although hedge funds and brokerages are investing in Bitcoin ETFs, RIAs are still cautious in their approach.
Explore the nascent journey of Bitcoin ETFs and the cautious adoption by registered investment advisors, alongside potential future trends in cryptocurrency investments.
Registered Investment Advisors & Bitcoin ETF Adoption
Samara Cohen, BlackRock’s Chief Investment Officer of ETF and Index Investments, recently discussed the slow uptake of spot Bitcoin ETFs among registered investment advisors (RIAs). She noted that the majority of investments in Bitcoin ETFs come from self-directed investors, who constitute approximately 80% of the market, as per CNBC reports. Despite this interest from individual investors, a significant portion of institutional investments, such as those from hedge funds and brokerages, remains relatively conservative.
Why Are Investment Advisors Wary?
Cohen explains that RIAs are understandably cautious due to the high volatility associated with Bitcoin. The cryptocurrency has experienced price swings of up to 90% historically, which poses a substantial risk for portfolio construction. RIAs are fiduciaries to their clients, meaning their primary responsibility is to manage and mitigate risks while ensuring proper due diligence is conducted. This cautious approach underscores the slow adoption of Bitcoin ETFs among investment advisors.
Imminent Evolution in the Bitcoin ETF Space
Cohen believes that RIAs are at the beginning of their journey in adopting Bitcoin ETFs. She emphasizes the current phase as crucial for collecting important data, performing risk analysis, and determining Bitcoin’s role in investment portfolios. “This is a moment,” Cohen states, highlighting that advisors are looking to determine the appropriate allocation of Bitcoin based on an investor’s risk tolerance and liquidity needs.
Future Projections: A Potential Shift
Predicting a potentially significant change, Mark Yusko from Morgan Creek recently forecasted that investment advisors might start allocating a small percentage of funds to spot Bitcoin ETFs, particularly those managed for the baby boomer generation. Yusko speculates that around 1% of the $30 trillion managed by financial advisors could flow into Bitcoin ETFs. This would translate to approximately $300 billion entering the cryptocurrency market, more than has been converted to Bitcoin in its 15-year history, signaling a possible major shift in institutional cryptocurrency adoption.
Conclusion
To wrap up, while the adoption of Bitcoin ETFs by registered investment advisors has been slow, there is evidence suggesting a future shift. Advisors are proceeding with caution, ensuring thorough risk assessments and due diligence, which is critical in managing volatile assets like Bitcoin. The coming months and years may see a significant change as more data and risk analytics become available, potentially leading to increased allocations in Bitcoin ETFs and a broader acceptance within institutional investment portfolios.
