The world of cryptocurrency investment is about to undergo a significant shift, as major broker dealers start to warm up to the idea of Bitcoin and Ethereum exchange traded funds (ETFs). This development, fueled by growing comfort among financial giants, is expected to make waves in the investment community.
Samara Cohen, BlackRock’s Chief Investment Officer of ETFs and index investments, spoke to Bloomberg Television on Monday, highlighting the increasing interest from broker dealers who manage trillions in assets. According to Cohen, this interest will act as a catalyst for investors to include these funds in their portfolios.
“That is exactly what I think will be the story of this year and next year,” Cohen stated. “They are doing their jobs, and their job is risk analytics, due diligence.”
BlackRock ETF: A Turning Point
BlackRock’s decision to apply for a spot Bitcoin ETF in June 2023 marked a significant milestone. The application is based on the price of Bitcoin, the world’s largest cryptocurrency by market value. This move is seen as a turning point, potentially spurring the Securities and Exchange Commission (SEC) to approve such ETFs, given BlackRock’s considerable influence with over $10 trillion in assets under management.
Despite this, BlackRock has yet to include crypto ETFs in its own model portfolio. Cohen mentioned that while BlackRock doesn’t currently plan to add ETFs based on the ongoing price of cryptocurrencies beyond its existing BlackRock Bitcoin Trust (IBIT) and BlackRock Ethereum Trust (ETHA), the firm’s involvement signals a broader acceptance and integration of crypto assets in traditional finance.
Cautious Steps by Financial Giants
Morgan Stanley, Wells Fargo, UBS, and other large asset managers have approached crypto investments with caution. This year, both Morgan Stanley and Wells Fargo purchased shares in spot Bitcoin ETFs. Morgan Stanley has also indicated that it may reevaluate its policies to allow financial advisors to recommend Bitcoin ETFs to clients. UBS is among the authorized participants in the BlackRock Bitcoin Trust (IBIT), overseeing the creation and redemption of shares.
Cohen emphasized that these firms would be “looking at their role in the portfolio, and particularly, their utility as portfolio diversifiers.” The cautious steps taken by these financial giants are indicative of a broader trend of incorporating crypto assets into mainstream investment strategies.
Blackrock ETF: Model Portfolios and Future Allocations
One of the most anticipated developments is the inclusion of Bitcoin and Ethereum ETFs in model portfolios. Cohen believes that by the end of this year and into the next, allocations to these ETFs will become more common. “What will happen towards the end of this year, and into next year, is we will see allocations made into model portfolios, which would give us much more of a steer as to how investors are using them,” she explained.
This shift is expected to provide valuable insights into the role of crypto ETFs in diversified portfolios and how they can be utilized to enhance investment strategies. The BlackRock ETF initiatives are likely to set a precedent, encouraging other asset managers to follow suit.
Expanding Crypto ETF Landscape
While BlackRock is currently focusing on its existing crypto trusts, other major issuers are also entering the fray. Recently, VanEck and 21Shares filed applications for ETFs based on the spot price of Solana, the fourth-largest cryptocurrency by market cap. This expansion of the crypto ETF landscape underscores the growing interest and acceptance of various digital assets within the traditional financial system.
The move by BlackRock and other financial institutions towards embracing crypto ETFs represents a significant step in the integration of digital assets into conventional investment portfolios. As broker-dealers and asset managers become more comfortable with these products, the broader investment community is likely to follow, leading to increased adoption and diversification.
The Road Ahead for BlackRock ETF
The journey of the BlackRock ETF initiative is just beginning, and its impact on the investment landscape remains to be fully seen. However, the steps taken by BlackRock and the interest shown by major financial players signal a promising future for crypto ETFs. As these products become more mainstream, investors will have new opportunities to diversify their portfolios and explore the potential of digital assets.
In conclusion, the integration of Bitcoin and Ethereum ETFs into model portfolios by major broker-dealers and asset managers marks a new era for cryptocurrency investments. With BlackRock at the forefront, the future of crypto ETFs looks bright, offering exciting possibilities for investors worldwide. The BlackRock ETF initiatives are set to pave the way for a more inclusive and diversified investment landscape, blending traditional finance with the burgeoning world of digital assets.
