Platforms Will Buckle to Spot Bitcoin Demand

Reluctant firms are facing investor demand for access and momentum.

Jeff_Benjamin
|
Wealth Management Editor
|
Reviewed by: etf.com Staff
,
Edited by: James Rubin

A recent slump in asset flows to spot bitcoin ETFs notwithstanding, traditional finance holdouts are struggling increasingly to ignore the surging interest among investors for cryptocurrency assets. 

Exhibit A is a recent report that Morgan Stanley is reevaluating its policies for financial advisors about recommending spot bitcoin ETFs to its clients. Morgan Stanley is currently allowing advisors to invest on behalf of clients as long as the request came from the clients. 

Morgan Stanley declined to comment on how the company is policing this vague policy and might allow advisors to start recommending the ETFs directly to clients. 

The firm is not alone in its cautious approach to what has become the hottest ETF category ever. Such notable platforms as Raymond James Financial, LPL Financial and The Vanguard Group are among the firms still restricting access in varying degrees to spot bitcoin funds.

Last week, after 71 straight days of net inflows totaling nearly $12 billion, some spot bitcoin ETFs experienced their first outflows. Still, the speed with which the now 11 funds currently trading have generated this total has reluctant platforms reconsidering their stance.

Spot Bitcoin ETF Access Demand Rises

It doesn’t hurt that bitcoin's is up more than 38% this year. Platforms are likely finding it difficult to ignore investors' voracious appetite for cryptocurrency exposure with its potential for big gains. 

Similar to many old-school financial advisors who are still trying to ignore cryptocurrency as a potential investment, the brokerage platforms will find it increasingly difficult to deny access.

On Tuesday, the cryptocurrency space took another big step forward with the debut of separate bitcoin and Ethereum ETFs in Hong Kong. The ETFs from China Asset Management opened on the Hong Kong exchanges as the two most active funds during the trading day.

Bloomberg Intelligence analyst Eric Balchunas posted on social media that the dual launch in Hong Kong presents the first opportunity to measure investor appetite for bitcoin and ether-based products (ether is the native token of the Ethereum smart contracts blockchain). And it looks like the initial edge goes to the spot Ethereum funds, but that might be because the spot Ethereum ETFs are the first of their kind.

The Securities and Exchange Commission is still reviewing multiple applications for spot Ethereum ETFs to be offered on U.S. exchanges, and it remains unclear how the agency will rule. But what is clear is the market forces behind these kinds of products.

Morgan Stanley, Raymond James, LPL and Vanguard are surely paying attention to the SEC's deliberations as they consider expanding access for their clients.

Kudos to those firms taking the most cautious approach to cryptocurrency investing, but rest assured, it is a matter of when, not if, they will all eventually be on board.

Jeff Benjamin is the wealth management editor at etf.com, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.


Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.


Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.