Industry watchers claim that the latest spike in demand for US Bitcoin ETFs has increased pressure on companies who do not currently offer them to their customers.
The 10 fund segment saw net flows of $673mn on February 28th. On February 28, the combined trading volume of ETFs reached $7.6billion, shattering its previous record set on their first day.
Last week’s weekly inflow total for the funds was roughly $1.7 billion — second only to the amount of more than $2.2 billion seen from Feb. 12 to Feb. 16. From February 26 to March 1, the trading volume of bitcoin ETFs reached a new high, reaching $22 billion.
“That demand absolutely impacts how these funds are viewed by wirehouses and wealth managers,” Ryan Rasmussen is a Bitwise researcher.
Retail investors have been the primary drivers of initial demand for these funds. Analysts, industry executives and other professionals have stated that they anticipate another round of flow as investment platforms and more firms begin to allow customers to make ETF allocations.
Many platforms have specific liquidity requirements — like assets under management and average daily trading volume minimums — that funds must meet before they consider approving them on their platforms.
BlackRock’s iShares Bitcoin Trust (IBIT) crossed the $10 billion assets under management mark late last week — a feat reached faster than any ETF in history. Fidelity Investments Wise Origin Bitcoin Fund was worth $6.5billion at that time.
Grayscale Investments Bitcoin Trust ETF(GBTC) has brought in assets that were previously held as a trust on OTC exchanges for a period of about a decade. On Friday, the fund had assets totaling about $27 billion.
“The larger and more liquid these funds become, the easier it is for the due diligence teams to clear them for trading,” Rasmussen told Blockworks. “In other words, it’s hard to justify restricting access to ETFs with billions in [assets under management] and trading hundreds of millions in volume daily.”
Access to Bitcoin ETFs: a good idea or a bad one?
Fidelity, Charles Schwab and other brokerage titans launched bitcoin ETFs on January 11, giving investors the opportunity to invest in this cryptocurrency.
Bloomberg reported on Monday that Wells Fargo’s Merrill Lynch and Bank of America Merrill are now offering Bitcoin ETFs to their wealthy clients.
Blockworks confirmed that Wells Fargo offers bitcoin ETFs. “unsolicited purchases” WellsTrade, the online trading platform of WellsTrade or one of its advisers.
Fund giant Vanguard, meanwhile, has blocked the buying and trading of such funds on its brokerage platform — calling the investment case for crypto “weak.”
Bloomberg announced last month, that Carson Group had approved four bitcoin ETFs. The Nebraska-based RIA holds approximately $30 billion in its platform.
Meanwhile Savant Wealth Management — an RIA that manages about $25 billion in assets — has no plans to approve the bitcoin ETFs for its investment models, according to director of investment research Gina Beall.
“At Savant, we take an evidence-based approach to investing,” Beall tells Blockworks. “So we prefer to work with asset classes that can provide us with a good basis for understanding the expected return.”
According to Ric Edelman of Edelman Financial Engines, the bureaucracies of some larger companies are particularly slow.
“Investment Committees and compliance and risk management officers aren’t going to capitulate to pressure from the sales and marketing teams,” Edelman tells Blockworks. “So unless the C-suite imposes urgency, it could be 2025 before some of these firms add the products to their platforms.”
Rasmussen asserted that, despite the fact that wealth managers are increasingly allocating funds to bitcoin ETFs, this timeline is increasing daily.
“Their clients want to know why they aren’t invested in one of the year’s best-performing assets, and firms and reps don’t want to tell them, ‘We can’t invest in it.'” He also added. “You can imagine the frustration — and business risk — that would cause.”
The Small RIA is ready to allocate
David Warshaw said The Wealth Plan founder David Warshaw’s clients do not demand a Bitcoin ETF yet. He’s starting to make the investment option available.
Warshaw, a Great Neck resident in New York, manages around $65 millions of assets on behalf of 125 families.
Arbor Digital allocates the majority of his crypto-based investment portfolio to an Eaglebrook Advisors platform diversified strategy. He said that these investments, which total about $400,000.00 across about 20 clients.
Bitcoin ETFs offer a smaller single-asset focus that could be attractive to clients who are looking to diversify. “baby steps” Warshaw, Blockworks.
The investment professional has picked out several bitcoin ETFs for allocation — noting that investing a client’s assets into multiple funds that have different custodians is a prudent way to diversify.
“The first step for me was just to see how [the launches] went,” He told Blockworks. “I just needed to figure out who I wanted to work with. Now that I have those funds lined up, now it’s just a question of how much.”
Warshaw advises clients to allocate between 1%-5% of their total portfolio towards crypto.
“I just tell clients, whatever we do with this, you could lose all your money,” He said. “Do I think they’re going to lose all their money? No…but this is not the stock market; this is a highly speculative digital asset that has done frankly incredible over its lifetime.”
Bitcoin’s price (BTC) was hovering around $65,000 on Monday morning — up roughly 190% from a year ago and about 27% in the last week.
Time is a factor
Since their launch on January 11, the 10 US bitcoin spot ETFs saw a net of $7.4 Billion.
Matthew Hougan has revealed that the chief investment office of Bitwise’s bitcoin ETF, Bitwise said they expect to see a significant increase in Bitcoin ETFs. “secondary acceleration” When funds are transferred to national account platforms, they can be viewed as a flow. The CNBC interview last weekend revealed that the executive was going to be meeting with “one of the largest institutional consultants in the US” Bitwise bitcoin ETF.
While Warshaw is ready to allocate to bitcoin ETFs for clients wanting to jump in, many firms are still reviewing the funds — comparing the issuers, as well as the product expense ratios and spreads, Rasmussen said.
“Once they select which ETF, or ETFs, they prefer, they still have to add them to their model portfolios and bring the wealth managers up to speed,” He explained.
Edelman has previously stated that he believes financial advisers will allocate $150 billion to spot bitcoin ETFs over the next 2 years.
He noted that the greatest challenge remains in training advisers who are not familiar with bitcoin, blockchain and digital assets.
“While it will take some time, and there are a few more hurdles to clear, we’re getting closer every day,” Rasmussen said. “I think we’ll start to see most wealth managers allocating to bitcoin within the next 12 to 18 months.”
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