Bitcoin ETF hype has Wall Street eyeing $100 billion crypto potential

An ETF is, therefore, a game changer, according to Chuck Cumello, who’s receiving inquiries from millennial investors and high-net-worth individuals about the disruptive potential of a Bitcoin ETF.

“It would just be simple and easy to place a trade — to have it long in a client’s investment advisory account,” said the president and chief executive officer of Essex Financial Services in Essex, Connecticut.

Another piece of evidence that institutions might be who ETF issuers are looking to target: Sober-sounding tickers like IBTC and BTCO suggest the products will be aimed at the advisory market.

“When tickers are more fun, that generally shows their aim is younger retail investors, who in this case aren’t likely to be a big audience for these funds,” Bloomberg Intelligence’s Eric Balchunas and James Seyffart wrote in a note.

Case in point: Over at Compass Financial Advisors in Fort Wayne, Indiana, Chris Swanson and James Weber build model portfolios, a type of bespoke investment strategy. They often advise their clients on how to allocate a certain percentage toward alternative assets like cryptocurrencies.

For instance, a portfolio might have 55% geared toward equities, another 25% toward bonds and 20% in cash, alternatives and digital assets. After the spot funds launch, the firm’s existing crypto bets — via Bitwise’s Crypto Industry Innovators ETF (BITQ), for example — would likely flow into the Bitcoin ETFs once available.

“We want to make sure that we perform well for our clients and we think that this is going to be a differentiator in how we perform versus other advisers,” Swanson said of crypto exposure.

The word of caution comes from Laila Pence, founder of $2 billion registered investment adviser Pence Wealth Management. Digital-asset interest among younger clients has eased dramatically since the heady pandemic days when all manner of coins were skyrocketing, she says. Plus the stock market is doing well this year too, she reminds them.

“Why take a risk when the S&P and the Nasdaq have done so well this year, and that’s safer and more reliable?” she said from Newport Beach, California.

Yet to crypto bulls, there’s a bigger point to make: The ETF will normalize a discredited asset class. Its transparency and liquidity offer a compliance-friendly opportunity for institutional counterparties, potentially unleashing fresh lending and derivatives trades, argues Coinbase.

“Thus, what an ETF represents for Bitcoin adoption extends beyond the immediate inflows into these products, potentially reshaping the market in entirely unprecedented ways,” it said in a report. “Nevertheless, we think this will take time to unfold.”