Jonathan Ra | norphoto | Getty Images
Which is long awaited Bitcoin Exchange-traded funds launched in January, and financial advisors are on their way — albeit gradually — toward adopting them, according to BlackRock's Samara Cohen.
Currently, about 80% of Bitcoin ETF purchases likely come from “self-investors who have allocated their own funds, often through an online brokerage account,” she said, speaking at the Coinbase State of Crypto Summit in New York City. New York. Thursday. iShares Bitcoin Trust (IBIT) was among the funds that debuted earlier this year.
Cohen, chief investment officer for ETFs and index investments at BlackRock, noted that hedge funds and brokerage firms were also buyers, based on fourth-quarter 13-F filings, but registered investment advisers were a little more “cautious.”
CNBC recently polled its board of advisors about why they and their colleagues are wary of the new products, which represent a regulated, familiar investment product for a new asset class that has received significant attention in recent years. Responses ranged from Bitcoin's notorious price volatility to the leading cryptocurrency being too new to establish a track record. Regulatory compliance and cryptocurrencies' reputation for fraud and scandal were also on advisors' minds.
“I would call them cautious…that's their job,” Cohen said of skeptical financial advisers.
“The investment advisor is the fiduciary for his clients,” she added. “This is an asset class that has seen 90% price volatility at certain times in history, and their job is to build portfolios and do risk analysis and due diligence. They're doing that now.”
iShares Bitcoin Trust (IBIT) in 2024
“This is a moment, in terms of putting out the data that really matters, the risk analytics (and determining) what role bitcoin can play in a portfolio, and what kind of allocation is appropriate given the investor’s risk tolerance and liquidity needs,” she added. “That's what a consultant is supposed to do, so I think this journey we're on is absolutely the right journey and they're doing their job.”
Cohen said she sees bitcoin ETFs as a bridge between cryptocurrencies and traditional finance — especially for investors who may be interested in allocating to bitcoin without having to manage their risks across two different ecosystems. She said that before ETFs, the current trends toward cryptocurrencies were not enough for what some investors wanted to do.
Alicia Haas, CFO of Coinbase, said bitcoin is “on a slow journey of adoption” — a theme that resonated throughout the conference sessions.
Blue Macellari, head of digital asset strategy at T. Rowe Price, noted that the 1% allocation is considered by some investors to be a safe and comfortable amount. She said she views wallet allocations in Bitcoin as binary events, where they must be greater than 1% or zero, but also acknowledged the cautious approach to adoption.
“There is a psychological component where people need to test the waters and feel comfortable,” Macellari said. “It's a paradigm shift… It takes time for people to ease their way into it.”
