Why Financial Advisors Are So Excited About a Spot Bitcoin ETF - Ep. 572
Nov 21, 2023
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Ric Edelman, founder of the Digital Assets Council of Financial Professionals and author of 'The Truth About Crypto,' dives into the evolving landscape of Bitcoin ETFs. He highlights that while only 12% of advisors currently recommend Bitcoin, a staggering 77% are waiting for a spot Bitcoin ETF to emerge. Edelman discusses how FTX's collapse has shifted perceptions and the low knowledge among advisors regarding crypto. He also explains why interest in futures ETFs has been lukewarm compared to the anticipated enthusiasm for spot ETFs.
The launch of spot Bitcoin ETFs is expected to lead to high demand among financial advisors and their clients.
Financial advisors have a limited understanding of Bitcoin but are expected to seek opportunities to educate themselves and their clients with the launch of Bitcoin ETFs.
Competition among Bitcoin ETF providers will likely be intense, with established ETF providers and companies like Grayscale and VanEck having an advantage.
Deep dives
Financial advisors eagerly waiting for Bitcoin ETF
According to a survey, 77% of financial advisors are eagerly waiting for the launch of the spot Bitcoin ETF. Historically, financial advisors have been slow to engage with cryptocurrencies, but recent developments in blockchain technology and increased institutional adoption have caught their attention. Clients have been asking their advisors about Bitcoin, but the lack of an effective investment product for advisors to offer has been a barrier. However, the upcoming Bitcoin ETFs, expected to launch by January 10th, 2024, offer a convenient and familiar investment vehicle for advisors and their clients. Advisors are increasingly acknowledging Bitcoin as a legitimate asset class and are excited about its inclusion in diversified portfolios.
Financial advisors' limited knowledge about Bitcoin
Despite their interest in Bitcoin, many financial advisors have a limited understanding of the cryptocurrency. Training seminars have revealed that while 47% of advisors personally own Bitcoin, they struggle to explain its investment thesis to clients. Some advisors view it as a speculative asset, others as digital gold, but there is a lack of comprehensive understanding. This knowledge gap has hindered advisor engagement with Bitcoin in the past. However, with the launch of Bitcoin ETFs, advisors are expected to seek opportunities to educate themselves and their clients about Bitcoin, leading to greater adoption and investment in the cryptocurrency.
Competitive landscape of Bitcoin ETFs
With multiple companies planning to launch Bitcoin ETFs, competition in the market is expected to be intense. Established ETF providers like BlackRock, Fidelity, and Franklin Templeton are likely to have an advantage due to their existing relationships with advisors. Grayscale, with its Grayscale Bitcoin Trust, already has a large number of Bitcoin investors and is expected to generate significant interest when it converts to an ETF. Other players, such as VanEck, WisdomTree, Bitwise, and Arc, will also leverage their existing client base. To differentiate themselves, ETFs might explore novel features like generating yield on Bitcoin through lending, selecting secure custodians, forming surveillance partnerships to determine Bitcoin prices, and actively managing the ETF. The competition among these ETFs is expected to lead to lower fees, better investor outcomes, and a diverse range of investment options.
Financial advisors embracing Bitcoin ETFs
Financial advisors are increasingly interested in Bitcoin ETFs, driven by client demand and the desire to maintain their role and credibility. Many advisors are realizing that a significant number of their clients already own Bitcoin, often without their knowledge or assistance. By offering access to Bitcoin within their portfolio services, advisors aim to improve client relationships, increase assets under management, and enhance the level of service provided. This engagement with Bitcoin ETFs is seen as a business-building tool that can benefit advisors and their clients.
Differentiating spot Bitcoin ETFs from futures ETFs
The interest in spot Bitcoin ETFs is expected to surpass that of futures ETFs. Advisors display limited interest in futures ETFs due to their complexity, costliness, and lack of familiarity. In contrast, spot Bitcoin ETFs are seen as a game-changer, offering more accessibility and simplicity for advisors and their clients. Advisors typically do not trade futures in stocks, so the convenience and straightforwardness of spot ETFs make them more attractive. The approval and launch of spot Bitcoin ETFs are anticipated to generate greater excitement and inflow of assets into the cryptocurrency market.
According to surveys of financial advisors, only 12% are currently recommending that clients invest in Bitcoin, while 47% of advisors personally own Bitcoin and a whopping 77% say they are waiting for a spot Bitcoin ETF to become available so they can offer it to their clients.
On this episode of Unchained, Ric Edelman, founder of the Digital Assets Council of Financial Professionals and author of “The Truth About Crypto,” explains how this should all lead to high demand once the first spot Bitcoin ETFs become available, although it will take some time for them to allocate. Edelman also discusses how FTX’s implosion impacted advisor perceptions of crypto, why investors have not been that excited by crypto futures ETFs, and which Bitcoin ETF issuers he believes are likely to be the big winners.
how regulatory confusion keeps financial advisors away from recommending Bitcoin to their clients
how the collapse of FTX affected financial advisors’ interest in crypto, according to Ric
how the knowledge level of financial advisors about Bitcoin is "extraordinarily low"
why 77% of investment advisors are willing to buy a spot Bitcoin ETF
why there wasn't a huge interest from advisors after the launch of Bitcoin futures ETFs
the percentage of client portfolios that he expects they will allocate to BTC
why Ric thinks there won't be huge inflows immediately after the approval of spot BTC ETFs
how financial advisors will decide whose ETF to buy, among the 12 potential issuers
why he believes spot Ethereum ETFs have great growth potential
why he thinks tokenization might be the "next big thing" that will increase institutional activity
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