Last week, the SEC approved the initial regulatory filings for spot ethereum ETFs to trade on various U.S.-based exchanges. While it could be weeks or months before the ETFs are available, this is a big deal for the industry. There are 10 pending crypto funds that could be soon purchased. We shall soon see if this is also big deal for advisors and end clients.
What Do Advisors Think About Crypto?
VettaFi hosted an April webcast with Invesco. It was titled, “Navigating the Landscape: A Comprehensive Update on Fixed Income, Equities and Alternative Investments.” This was not a webcast solely for crypto enthusiasts.
We polled the audience on a few topics. One question was, “Do you believe cryptocurrencies deserve all the attention they are getting right now?”
While 35% said no for multiple reasons, 29% said maybe and they were cautiously watching it all right now. Another 20% said it was good to learn about new asset classes but not sure about investing in them. Education about cryptocurrency investing via ETFs is still in the early stages and there’s room for further adoption.
First U.S. Bitcoin ETFs Less Than 5 Months Old
It was only January 2024 when the first spot bitcoin ETFs like the Invesco Galaxy Bitcoin ETF (BTCO) were available in the U.S but only after a multiyear journey. It was a key milestone, and spot bitcoin ETFs have been tremendously successful. Nine ETFs manage more than $400 million each, including three with over $10 billion. Those most popular are the Grayscale Bitcoin Trust (GBTC), the iShares Bitcoin Trust (IBIT), and the Fidelity Wise Origin Bitwise Fund (FBTC). The same firms and others are awaiting approval to launch a separate spot ethereum ETF.
ETFs Preferred by Advisors to Access Cryptomarket
In a Bitwise/VettaFi survey from the end of 2023, 25% of advisors said they found ethereum an interesting area of the cryptomarket. This was an increase from a year earlier. Improving sentiment for ethereum contrasted with bitcoin that saw a dip in its popularity.
Meanwhile, 64% of advisors said an ETF was their preferred method of investing in crypto. Advisors have gained significant comfort in the ease of use with ETFs. For many, the existing spot bitcoin ETFs can slide in nicely into an asset allocation strategy.
What’s the Deal With Ethereum?
VanEck offers the VanEck Bitcoin Trust (HODL) and has a pending ethereum ETF awaiting approval. The firm believes many traditional financial market participants may not fully understand that ethereum is not just a speculative asset. Ethereum has extensive real-world utility, underpinning a vibrant decentralized application ecosystem.
Ethereum supports more than 270 million unique user addresses and processes an average of 1.2 million transactions daily. On-chain value settlements exceeded $2.8 trillion over the last year, compared to global remittances of $860 billion, PayPal volumes of $1.5 trillion, and Visa network volume of $15 trillion. Major companies like Reddit, Nike, and Visa have launched ethereum-based projects.
Meanwhile, Bitwise pointed out that ethereum is also the primary platform for stablecoins and DeFi, whose markets comprise more than $150 billion each. Bitwise offers the Bitwise Bitcoin ETF Trust (BITB) and the Bitwise Ethereum Strategy ETF (AETH). The latter uses crypto futures to gain exposure.
At VettaFi, educating advisors and investors about ETFs is core to our mission to transform financial services into a community. As these pending alternative ETFs are likely to come to market in the second half of 2023, we look forward to providing insights and access to industry expertise.
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