January saw the approval of spot Bitcoin ETFs, the most drastic shift in financial markets. With this development, however, many financial advisors are still in the process of determining how these new instruments can be used in managing their clients’ investment portfolios.
Currently, the key clientele engaging in such ETFs, according to Samara Cohen, BlackRock’s Chief Investment Officer for ETFs and Index Investments, is ‘self-directed,’ which means that people invest through online brokerage.
At the same time, they are involved in some extension institutional players like hedge funds and brokerages. However, the Registered Investment Advisors (RIAs) are cautious and approach the issue with prudence while exploring investment in Bitcoin ETFs.
Given the volatile nature of Bitcoin and because it has not been in the financial market for a long time, many registered investment advisors (RIAs) are very cautious when it comes to this virtual currency. Since RIAs are supposed to assess risks and design portfolios properly, they are now expected to include such new assets as Bitcoin.
Cohen described the importance of data analysis and risk evaluation as the key to understanding the role of Bitcoin in the investment portfolio. She provided these insights during Coinbase’s State of Crypto Summit, emphasizing that investors need advisors when entering new territories such as cryptocurrency investments.
For those who want to enter the Bitcoin sphere without the need to deal with various investment platforms, spot Bitcoin ETFs serve as important intermediaries between cryptocurrency and financial markets. Cohen pointed out that before the advent of ETFs, there were fewer ways for ordinary investors with traditional portfolios to invest in the cryptos.
The latest statistics also show that the business world is increasingly concerned, 937 companies are investing in the U.S. spot Bitcoin ETFs in the first quarter of 2024. Some of the notable shareholders are millennial management, Morgan Stanley, JPMorgan, UBS, Wells Fargo, and the state of Wisconsin investment board.
However, most financial advisors, especially those operating in conventional and preserve-oriented markets, are still very cautious. Brian Sokolowski, founder and principal of Bluebird Wealth Management in Massachusetts, said that no Bitcoin ETF is on the radar of his senior clientele, mainly aged 50 and above and likely to retire. Among his clients, the younger segment may occasionally show interest in investing in cryptocurrencies, but it is only a trend for some of them.
The dynamics, however, may change as the younger generation gains more control over money and as financial organizations accommodate the future use of cryptocurrencies. In a CNBC interview, billionaire hedge fund manager Steve Cohen said he owned a little bit of Bitcoin as his son got interested in them, which is a reflection of the shift in the current generation towards the acceptance of cryptocurrencies.
Alesia Haas, the Coinbase Chief Financial Officer, also stated that Bitcoin is slowly and gradually entering into the lists of investment portfolios. It means that there is a gradual yet continuous inclination toward accepting cryptocurrency in the world of investments. As this trend goes on, it will probably influence how advisors suggest allocation in the more virtual world of financial services.
