Bitcoin ETF Inflows Are Skyrocketing. Do Advisors Care?
The firm generally invests clients in FBTC since it is one of the most liquid options and because Fidelity is the custodian rather than another exchange. A major benefit is that the tax reporting rolls up into the client’s brokerage portfolio, rather than separate tax documents, which means tax preparation fees are kept low, he said.
Bitcoin Momentum
Cetera became one of the first independent brokers to jump on the bandwagon after recognizing increased demand from their clients. The regional BD approved four bitcoin ETFs in March, along with guidelines for advisors, and set limits on the amount clients can purchase based on their risk profile.
“We are taking a balanced approach,” Cetera’s head of investment products, Matt Fries, said in an email. “Brokerage clients with a more aggressive investment objective and risk tolerance [can] invest a portion of their money in these products, in accordance with defined concentration limits.”
Wells Fargo’s brokerage unit also confirmed it has opened up access to ETFs that invest directly in bitcoin, including to some wealth management clients that specifically request the products. Merrill Lynch, and other wirehouses, are reportedly offering crypto products to clients only if they inquire about the products.
Better Than ‘Digital Gold’
For Svetlin Krastev, an advisor with New York-based Black Sea Gold Advisors, investment ideas that can diversify an overall portfolio, and bring down the correlation between asset classes, are a top priority. Bitcoin ETFs fit the bill.
“It’s really cheap and very liquid,” Krastev said. While clients may have a Coinbase account and they can invest by themselves, most of his clients don’t want to be hands-on with their investment, especially money saved for retirement, he said. “ETFs become very suitable instruments.”
More than half of his New-York based clients have asked about bitcoin ETFs and he has clients that are currently invested. Those demographics tend to skew younger, and a 3% allocation in bitcoin ETFs is reasonable for clients in their 30s, he said.
Krastev likened cryptocurrency to digital gold, and while he has never invested clients in physical gold, he sees significant benefits to investing his clients in bitcoin — especially in an easy-to-use ETF wrapper.
“You can’t eat gold. You can’t drink it. Outside of jewelry and some very limited applications in some industries, there’s really nothing special about that metal,” Krastev said. “I see a lot more potential in bitcoin.”
How Are Advisors Using Bitcoin ETFs?
One of the steepest barriers to adoption for some advisors is determining how cryptocurrency fits into their clients’ investing goals. Advocates say bitcoin ETFs are an effective tool to diversify portfolios with little correlation to the overall market — not to mention, potentially exponential upside.
However, the dangers are well documented, including cybersecurity or fraud concerns and wild price fluctuations.
That’s not stopping Gregory Corneille, a registered investment advisor with Choice Wealth Management in Atlanta, who is considering opening bitcoin ETFs investing to his clients.
“Clients are coming to us because they don’t have strong opinions about buying this or buying that, but they want crypto,” he said.
He has his eye on Bitwise 10 Crypto Index Fund (BITW), whixh tracks an index of the 10 most highly valued cryptocurrencies weighted by market capitalization and is rebalanced monthly.
While investors are getting the most exposure to bitcoin, other potentially viable crypto investments — like ether, solana, cardano and a handful of others — are also built into the fund.
“You’re not going to be able to use bitcoin at a Starbucks tomorrow,” Corneille said. “But as the other currencies start to gain traction and momentum — if someone figures out a better mousetrap — then you’re going to have exposure. It’s a piece of an overall strategy.”
Credit: Bloomberg
