BlackRock’s chief investment officer for index investments, Samara Cohen, recently implied that amidst the recent success of spot Bitcoin exchange-traded funds, financial investors still exercise some degree of caution when investing.
The volatility and infancy of Bitcoin and related exchange-traded funds are the primary drivers behind this investment class’s slow adoption.
Financial Advisors Are Cautious
Since their debut in January 2024, spot Bitcoin ETFs have attracted massive investments from loads of individual and institutional investors, with the investment vehicle recording over $15 billion in inflows. However, according to Samara Cohen, this fast-moving investment vehicle has yet to convince financial advisors.
Cohen mentioned that according to last quarter’s 13-F filings, brokerages and hedge funds have been key participants and buyers in spot Bitcoin ETFs.
Speaking at the Coinbase State of Crypto Summit in New York City on Thursday, she noted that approximately 80% of Bitcoin ETF purchases are made by self-directed investors using online brokerage accounts. However, registered financial advisors have remained skeptical, with Cohen describing their stance as “wary.”
She believes financial advisors only do their job by expressing skepticism before investing. She stated:
“An investment advisor is a fiduciary to their clients. This is an asset class that has had 90% price volatility at times in history, and their job is really to construct portfolios and do the risk analysis and due diligence. They’re doing that right now.”
Owing to the volatile nature of cryptocurrencies, Cohen believes financial advisors must keenly analyze data and check for risks before deciding on appropriate investment exposure based on an investor’s risk tolerance.
Blue Macellari, the head of digital assets strategy for T. Rowe Price, shows that many see 1% as safe and comfortable exposure. Another speaker, Alesia Haas, the Chief Financial Officer of Coinbase, also noted that Bitcoin is “on a slow journey of adoption.”
Volatility, Infancy, and Regulatory Uncertainty
According to Cohen, the inherent volatility of Bitcoin, which has experienced significant value fluctuations since its inception, is a primary reason for the skepticism displayed by financial advisors. Additionally, spot Bitcoin ETFs are still in their early stages, lacking a track record, further contributing to the advisors’ cautious stance.
The challenging regulatory environment has also been a discouraging factor, as regulators seemingly target crypto projects.
Despite all the drawbacks, Cohen maintains that Bitcoin ETFs can bridge the significant gap between cryptocurrency and traditional finance, especially for investors with fear of exposure to risks.
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