BlackRock to Add Bitcoin, Ether ETFs by 2024

In A Nutshell

BlackRock, the global investment giant, has recently shared insights on the future of crypto ETFs (Exchange-Traded Funds) within model portfolios, hinting at a significant shift towards the end of 2024. Samara Cohen, BlackRock’s ETF and Index Investments CIO, highlighted the increasing interest in digital currency-backed ETFs among large brokerage firms and the role of Bitcoin and Ether in diversifying investment portfolios.

The Growing Interest in Crypto ETFs

During a Bloomberg interview, Samara Cohen disclosed that major wirehouses, including Morgan Stanley, Wells Fargo, and UBS, are in the process of integrating crypto ETFs into their offerings. This move involves rigorous risk analytics and due diligence, focusing particularly on Bitcoin and Ether. Cohen predicts a noticeable allocation into model portfolios by the end of this year, which will serve as a testament to how investors are incorporating crypto ETFs into their financial strategies.

Model Portfolios and the Future of Investment

Model portfolios are pre-designed investment strategies provided by large brokerage firms, aimed at achieving a balanced risk-return ratio. BlackRock foresees the assets managed through model portfolio strategies to surge from $4.2 trillion to $10 trillion within the next five years. This exponential growth is attributed to the shift in how fiduciary advisers conduct business, increasingly relying on these predefined investment frameworks.

Bitcoin and Ether: Diversifiers in Investment Portfolios

Despite recent outflows from Ether spot ETFs, Cohen remains optimistic. She attributes these outflows to the natural selection process within the market, where investors move away from higher-priced funds in search of more reliable investment vehicles. Cohen emphasizes the importance of Bitcoin and Ether as diversifiers in investment portfolios, offering different use cases and benefits.

Spot Ether ETFs and the Market Response

Since the launch of spot Ether ETFs, the market has witnessed significant outflows, including a notable reduction in the Grayscale Ethereum Trust. However, a portion of these funds has transitioned into the zero-fee Ethereum Mini Trust, indicating a continuous interest in Ether exposure. Despite these movements, Ether spot ETFs have predominantly seen outflows, with minimal inflow activity.

Outlook on Altcoin ETFs

Samara Cohen mentioned the unlikelihood of seeing a spot ETF for altcoins like Solana in the near term. This sentiment was echoed by Robert Mitchnick, BlackRock’s head of digital assets, suggesting a cautious approach towards expanding the range of crypto ETFs beyond Bitcoin and Ether.

Our Take

The integration of crypto ETFs into model portfolios marks a pivotal moment for digital asset investments. BlackRock’s insights shed light on the evolving landscape, where traditional financial strategies begin to intertwine with the burgeoning crypto market. Bitcoin and Ether’s inclusion as diversifying assets underscores the growing recognition of cryptocurrencies’ value beyond mere speculative instruments.

This development also reflects the cautious yet optimistic stance of major investment firms towards the crypto sector, balancing innovation with due diligence. As we move towards the end of 2024, the financial industry’s adaptation to include crypto ETFs in model portfolios will likely catalyze further acceptance and integration of digital assets in mainstream investment strategies. However, the cautious approach towards altcoin ETFs indicates a measured, risk-aware strategy that prioritizes stability and trust in the burgeoning crypto ecosystem.

Sources

– Bloomberg Interview with Samara Cohen, July 29
– Grayscale Ethereum Trust and Ethereum Mini Trust financial data