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Financial advisors are wary of investing in spot Bitcoin ETFs, BlackRock executive says
BlackRock’s head of index investing, Samara Cohen, recently implied that despite the recent success of spot Bitcoin exchange-traded funds, financial investors still exercise a degree of caution when investing.
The volatility and early stage of Bitcoin and related exchange-traded funds are the main factors behind the slow adoption of this investment class.
Financial advisors are cautious
Since their debut in January 2024, spot Bitcoin ETFs have attracted massive investments from numerous individual and institutional investors, with the investment vehicle experiencing inflows of more than $15 billion. However, according to Samara Cohen, this that moves fast the investment vehicle still has to convince financial advisors.
Cohen said that according to last quarter’s 13-F filings, brokerages and hedge funds were key participants and buyers in spot Bitcoin ETFs.
Speaking of on Thursday, at the Coinbase State of Crypto Summit in New York City, he noted that about 80% of Bitcoin ETF purchases are made by self-directed investors using online brokerage accounts. However, registered financial advisors remained skeptical, and Cohen described their position as “wary.”
He believes that financial advisors only do their job by expressing skepticism before investing. He stated:
“An investment advisor is a fiduciary for their clients. This is an asset class that has had 90% price volatility at some points in history, and their job is really to build portfolios and perform risk analysis and due diligence. They’re doing it right now.”
Due to the volatile nature of cryptocurrencies, Cohen believes that financial advisors need to carefully analyze the data and check the risks before deciding on the appropriate investment exposure based on an investor’s risk tolerance.
Blue Macellari, head of digital asset strategy at T. Rowe Price, shows that many see 1% as a safe and comfortable exposure. Another panelist, Alesia Haas, Chief Financial Officer at Coinbase, also noted that Bitcoin is “on a slow journey to adoption.”
Volatility, infancy and regulatory uncertainty
According to Cohen, the inherent volatility of Bitcoin, which has undergone significant fluctuations in value since its inception, is one of the main reasons for the skepticism shown by financial advisors. Additionally, spot Bitcoin ETFs are still in their early stages, lacking a track record, further contributing to advisors’ cautious attitude.
The challenging regulatory environment has also been a discouraging factor, as regulators appear to be targeting crypto projects.
Despite all the drawbacks, Cohen argues that Bitcoin ETFs can bridge the significant gap between cryptocurrency and traditional finance, especially for investors who fear exposing themselves to risk.