Advisors Bullish on Spot Bitcoin ETF, but There’s a ‘But’

If there’s one big, near-term event that has cryptocurrency bulls and the exchange traded funds industry on the edge of their respective seats, it’s the possibility – emphasis on that word – that the Securities and Exchange Commission (SEC) will soon approve spot bitcoin ETFs.

Recent buzz in the ETF world indicates the SEC could approve spot bitcoin ETFs as soon as this week. That seems like a stretch, but hey, anything is possible. Whether or not that approval arrives in days or weeks, the overarching point is that there’s ample enthusiasm for such a product to finally come to life in the U.S.

Interestingly, many registered investment advisors aren’t betting on a spot bitcoin ETF coming to market at any point this year.

“Surprisingly, only 39% of advisors believe a spot bitcoin ETF will be approved in 2024. By contrast, Bloomberg ETF analysts peg the likelihood of a January approval at 90%,” according to a recent survey conducted by Bitwise Asset Management.

On the Other Hand…

While advisors aren’t expecting that a spot bitcoin will be approved this year, they do want access to such a product because fewer than one in five have access to cryptocurrencies in client accounts.

“Eighty-eight percent (88%) of advisors interested in purchasing bitcoin are waiting until after a spot bitcoin ETF is approved,” added Bitwise.

There are relevant historical lessons that indicate a spot bitcoin ETF could very well be a hit and that it could be advisors that drive a large part of that success. Bitcoin is often referred to as digital gold and that comparison has made its way to the world of ETFs where some experts believe there are parallels between spot bitcoin ETFs and bullion-backed funds such as the SPDR Gold Shares (NYSEARCA: GLD).

A strong case can be made that it was ETFs backed by physical holdings of gold, some of which are now among the largest commodities ETFs in the world, democratized commodities investing and made it more efficient for and appealing to a broader audience, including advisors.

Additionally, a spot bitcoin could be well-timed for crypto enthusiasts because data indicate that advisors that can allocate client capital to cryptocurrency are increasingly doing so.

“Large crypto allocations (more than 3% of a portfolio) more than doubled, from 22% of all client portfolios with crypto exposure in 2022 to 47% in 2023,” notes Bitwise.

Why Advisors Matter in Spot Bitcoin ETF Scenario

Beyond advisors and wealth managers, there’s strong appetite for spot bitcoin ETFs. So much so that those products can likely thrive without the support of the advisory community, but financial advisors are pivotal in the spot bitcoin scenario for multiple reasons.

First, advisors often allocate client capital for the long-term, meaning they’re unlikely to be moving in and out of spot bitcoin ETFs on a short-term basis. Second, data indicate that once advisors get involved with crypto, they tend to stay involved and, over time, boost those exposures.

“Ninety-eight percent (98%) of advisors who currently have an allocation to crypto in client accounts plan to either maintain or increase that exposure in 2024,” concludes Bitwise.

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