Spot Bitcoin ETF Oddsmakers Overlook Advisor Impact

The oddsmakers are out in force scrambling to handicap what looks like an inevitable approval of as many as 10 spot bitcoin ETFs, which could create both a short-term selling opportunity and a longer-term buying opportunity. 

The Securities and Exchange Commission, in its typical cryptic fashion, is feigning as much neutrality as it can while finding ways to taunt the eager markets with vague hints on how it might eventually rule.  

That, according to the oddsmakers and market watchers, is how we got to this point, with the price of bitcoin up nearly 35% over the past month and up more than 115% over the past 12 months. 

Naturally, this leads to easy assumptions that the impact of an unprecedented ruling by the SEC to potentially permit a flight of nearly a dozen spot bitcoin ETFs to simultaneously begin trading is already baked into the price of the cryptocurrency.  

To that we say, hold your horses.  

Assuming some semblance of market efficiency, even around something as extraordinary and potentially game changing as bitcoin, it is probably correct that the information currently available representing the biggest names in asset management endorsing a spot bitcoin ETF is baked into the current price.  

A Spot Bitcoin ETF Could Stir Financial Advisors 

What forecasters may be missing is the impact of a few hundred thousand financial advisors viewing SEC approval as an official greenlight for crypto allocations. Add to that the scheduled halving of bitcoin in April, which is comparable to a massive reverse stock split, and you’ve got the biggest potential force that the price of bitcoin has ever seen. 

“This might not be a bursting dam that lasts days, but rather a monsoon that lasts months,” said Ric Edelman, founder of Digital Assets Council of Financial Professionals. 

Worth noting for those citing bitcoin’s 115% 12-month price spike as a market anticipating spot ETFs, the current price is still down nearly 45% from around $65,000 two years ago. 

“Sure, the rise to $37,000 reflects some of the news being baked in, but we’re far from done,” said Edelman. “It will be months and years, not days and weeks, for the price to rise.” 

Steady Drive Upwards vs ‘Sell the News’ for Bitcoin

A big part of a slow and steady drive upwards in the wake of a spot bitcoin ETF approval has to do with financial advisors, who represent both the biggest users of ETFs and the biggest skeptics of cryptocurrency. 

Edelman believes it will be a slow migration for financial advisors, but a migration, nonetheless. According to his research, three-quarters of financial advisors say they plan to allocate client assets to spot bitcoin ETFs. And with allocations expected to hover around 2% to 3%, “that translates to hundreds of billions of dollars flowing into these ETFs and into an asset with a current market cap of only about $500 billion,” he said. 

“Investment committees will have to approve of the products, and compliance and risk teams will have to establish guidelines for usage,” Edelman added. “ADVs and other disclosure documents might need to be updated, so it will take time.” 

Meanwhile, Tyrone Ross, chief executive and principal at 401 Financial, sees an opportunity for a more immediate benefit to those already holding bitcoin. 

“This is going to be a sell-the-news event,” he said, suggesting a price spike in the wake of SEC approval. 

Ross also believes the impact of the upcoming halving is being underestimated, and he isn’t convinced financial advisors will enjoy an easy entry point with clients. 

“Advisors don’t understand that their clients who want bitcoin probably already own it,” he said. “I think advisors are waiting on an ETF, but I don’t think they’re going to buy it.” 

Contact Jeff Benjamin at [email protected] and find him on X at @BenJiWriter