While the eleven spot bitcoin ETFs that launched in mid-January have garnered historic inflows from a variety of retail and institutional investors, a massive, barely tapped market awaits in the form of wealth managers who have traditionally shunned cryptocurrency.
The spot bitcoin ETFs, which launched Jan. 11, have collectively brought in over $3 billion in inflows, including the billions of dollars that have exited the Grayscale Bitcoin Trust (GBTC). Still, they are yet to conquer all markets.
Wider institutional investment, financial advisor adoptions and trading by major brokerages that are not permitting spot bitcoin trading will spur another round of inflows.
“The real winners in this are going to be the ones that win the wealth space in the U.S.,” Steve Kurz, Galaxy Digital Holdings Ltd.’s global head of asset management said in an interview with etf.com. “And that hasn’t even begun yet, it’s just starting.”
While financial advisors tend to favor ETFs due to the vehicle’s low cost, accessibility and liquidity, many are adamant about staying away from cryptocurrency because of its volatility. Major asset managers, most prominently the Vanguard Group, forbid the funds on their platforms, another potential barrier for opening the ETFs to a broader customer base.
Spot Bitcoin ETF Race
Invesco Ltd.’s commodity strategist Kathy Kriskey and Galaxy’s Kurz, in an interview at the ETF Exchange Conference in Miami Beach, Florida last week, said that education is a large part of winning over financial advisors, along with their clients pushing for the ETFs. They discussed with etf.com the barrier to further adoption of the Invesco Galaxy Bitcoin ETF (BTCO), which has been roughly in the middle of the spot bitcoin ETF pack with $315.4 million in assets.
“There were certain wire houses that said ‘absolutely not, we have no interest’ and then once the products launched, all of a sudden they are considering it, they’re actually amusing calls,” said Kriskey.
Kurz also added that they expect “international pockets” of interest in the funds, along with hedge funds playing a significant role as institutional investors.
“We’re already seeing the walls start to come down,” explained Kurz. “When you talk to senior management operational teams, operations and ETF teams, there’s increasingly coordination between those groups and a strategy developing… I think it literally is just a matter of time.”
Kurz also said he expects hedge funds to ramp up investments in the funds. “They’re waiting for is options to list,” he said. “They’re waiting for liquidity to continue to develop around some of the better functioning products.”
Matt Hougan, Chief Investment Officer of Bitwise Asset Management, said in a panel at the conference that he expects Vanguard, which has said outright it will not trade spot bitcoin ETFs on its platform, to eventually change their mind.
Contact Lucy Brewster at [email protected].