Ethereum ETFs Leave Some Advisors Unimpressed
The latest flight of spot crypto ETFs underscores the divisions within financial services.
The cryptocurrency space notched another big win this week with the debut of the first spot Ethereum ETFs, but much like the spot bitcoin ETFs that hit the market in January, the latest flavor of crypto investments is generally getting the cold shoulder from the financial planning community.
“We don’t do crypto, gold, silver or commemorative coins, and we also don’t buy velvet Elvis paintings,” said Tim Holsworth, owner of AHP Financial in Midland, Mich.
“Our clients look to us to be fiduciaries of their money, not gamblers that take chances on theoretical currencies that may or may not be a real thing,” he added.
While Holsworth doesn’t represent every financial advisor, he does represent a hardline corner of the financial services industry that continues to treat digital currencies as a risky and unproven concept.
Vanguard Says No to Crypto ETFs
The Vanguard Group, for example, is among the major financial institutions that refuses to allow trading cryptocurrency ETFs on its brokerage platform.
But even as some corners of financial services will keep resisting, others see the spot Ethereum debut as a big step toward expanding investor access.
“The number and quality of crypto investment products that are now available to investors and allocators has surged in recent years as the investment industry is realizing that crypto is no longer a fad, but here to stay,” said Nicholas Codola, senior portfolio manager at Orion in Omaha, Neb.
Ethereum ETFs Don’t Impress Most Advisors
“Just like gold physical custody ETFs brought that asset class to the average investor, so do these Ethereum ETFs open up access to any investor,” Codola added.
In addition to expanding access to cryptocurrency investing, Codola said the ETFs increase market efficiency.
“I’ve spoken to multiple people that work on the derivatives section of the market, and they noted after the spot Bitcoin ETFs went live in January, they noticed the Bitcoin futures markets tightened up a few basis points,” he said. “That indicates having these spot ETFs helps the whole market and may increase the pie for all.”
Bitcoin vs Ethereum ETFs: Own Both or Neither?
Ric Edelman, founder of Digital Assets Council of Financial Professionals, also sees value in the spot Ethereum ETFs going beyond just more crypto investing opportunities.
“There’s a big difference between bitcoin and Ethereum,” he said. “Bitcoin is a store of value but doesn’t have much of a commercial application, whereas Ethereum has almost limitless commercial use in virtually every industry around the world.”
Edelman cited, as an example, the ability to use Ethereum to program the transmission of a payment, making it work similar to a contract but without the need for “any other human intermediary.”
And in terms of the investment opportunities, Edelman referenced the diversification benefits of owning both the spot bitcoin and spot Ethereum ETFs.
“We know advisors believe strongly in diversification, so we believe advisors who allocate to crypto will use both,” he said.
Ben Engel, investment advisor at Modesto Capital in Toms River, N.J., recognizes the diversification benefits of owning both bitcoin and Ethereum, but said, “I do not currently recommend Ethereum ETFs to clients.”
“Bitcoin holds greater significance than Ethereum in my view,” he said. “I believe blockchain technology is quite inefficient and only truly valuable where decentralization is a genuine necessity.”
Jason Weckerly, owner of Montgomery Wealth Management in Doylestown, Pa., said he “never recommended crypto, even as an alternative asset class,” and it boils down to regulation.
“Remember, Ethereum, bitcoin and all other forms of crypto add value and purpose because they are decentralized; in other words, unregulated,” he said. “How can I recommend any investment whose long-term existence is dubious at best?”