Bitcoin ETF Push Portends Institutions Flocking to Crypto
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It remains to be seen if the Securities and Exchange Commission will grant any of the latest spate of applications for a Bitcoin exchange-traded fund. But the recent push for one from companies such as
BlackRock
could point to a more important trend for the token: the arrival of institutional investors.
In a research note on Monday, analysts for Bernstein said traditional financial institutions seem to see a huge commercial opportunity in giving investors access to crypto assets and that the so-called crypto winter of the past year hasn’t dissuaded them. “This is not a drill or a meme anymore – institutions are finally here!” the analysts wrote.
In the past two weeks, fund firms have made a flurry of applications to launch an ETF that would hold spot Bitcoin, in contrast to the Bitcoin futures products already on the market. Recent applicants include Invesco (ticker: IVZ) and WisdomTree (WT), in addition to BlackRock (BLK).
The SEC in the past has rejected such requests, citing the potential for fraud on crypto trading platforms. However, a new market surveillance agreement proposed by BlackRock and Nasdaq, as well as optimism about an impending court decision over the SEC’s rejection of a proposed ETF, have given the firms reason for hope that things could be different.
If such products move forward, it could open the floodgates for investments by financial advisors who had previously found it too costly or inconvenient to put clients into Bitcoin. Right now, money managers often have to manage crypto on separate platforms from clients’ other investments, or buy funds that have high costs and don’t track Bitcoin’s price very well. ETFs, and the likely fee cuts that competition between issuers would bring, could solve both those issues.
Beyond that, according to Bernstein, the fact that fund companies are still moving forward with crypto and blockchain products shows that institutions are making a large bet that crypto is going to be sustained as an asset class. “We believe institutional interest in crypto is across the entire traditional financial services space – banks, asset managers, investment banks, broker-dealers and custodians etc.,” the analysts wrote.
Crypto investors have cheered the news, with the price of Bitcoin up about 19% to $30,419 since BlackRock’s filing, despite stagnating on Monday. Last week, digital-asset investment products also saw their biggest inflows of money since July 2022, according to research firm
Institutional interest in crypto has come in fits and starts. Regulatory scrutiny, concerns about fraud and custody issues, and the relatively small size of the crypto market all have restrained big firms from jumping in. But the recent applications show that could be changing.
“Serious institutional players have remained committed to their crypto strategy,” the Bernstein analysts wrote.
Write to Joe Light at joe.light@barrons.com