With Grayscale ETF Ruling, Advisors Face New Reality

It sure feels like late summer, but for bitcoin and other cryptocurrencies, spring has suddenly arrived. 

Grayscale Investments on Tuesday won a lawsuit against the SEC, which may allow it to convert the Grayscale Bitcoin Trust (GBTC) to an ETF, a watershed ruling that brings investors a step closer to the highly anticipated spot bitcoin exchange-traded fund.  

For investment advisors, whether they love, abhor, ignore or are somewhere in between with respect to digital currencies, their role in interpreting the anticipated investment opportunities just kicked up a notch.  

For advisors, this news could potentially elevate bitcoin as an asset class in the eyes of some investors. Like it or not, advisors may soon need to determine if, how and when to include crypto in a portfolio plan. Bitcoin would take a spot alongside stocks, bonds and other asset allocation decisions.  

Besides Grayscale, this is a big step for firms like BlackRock Inc. and Fidelity Investments, who also want to bring spot bitcoin ETFs to market. And for Grayscale and other ETF sponsors who have had to settle for years for creating products that indirectly access bitcoin, this is the furthest progress yet to allow them to get all the way there. 

Grayscale Victory Fuels Bitcoin Bulls

None of this means the debate on bitcoin’s investment merits and its characterization as an asset class will go away. Within the investment management industry, there has and will continue to be a wide range of opinions and factions. And while bitcoin’s price has risen 350% over the past five years, it is roughly flat since late 2020.  

It is easy to tell who the bitcoin bulls are. They’re the ones coming out with products. They see demand, and the court ruling in favor of Grayscale fuels their intentions in an unprecedented way.  

Then, there are the bitcoin bears, like David Kelly of JP Morgan Asset Management. Asked yesterday on Chuck Jaffe’s daily Money Life podcast what he thought of cryptocurrency, his response was simple: “It was a fraud to start with, it’s a fraud today. I wouldn’t touch it.” 

This is just the latest chapter in what has been one of the most popular and controversial investment industry topics. But with Grayscale’s win, it just turns up the need for advisors to develop their own opinion on cryptocurrencies and their potential usage in portfolios, if any.