What the bitcoin ETF could means for digital currencies in financial services
The recent launch of Bitcoin and Ethereum ETFs has been a significant milestone for the cryptocurrency industry, opening up these digital assets to a wider range of investors. BlackRock’s spot Bitcoin ETF broke records by amassing $10 billion in assets in just 49 days and has now climbed to over $20 billion under management.
As demand for crypto investment opportunities grows, there may be halo effects for financial services companies and digital assets.
We spoke with Chris Kline, co-founder of BitcoinIRA, which enables Americans to invest in Bitcoin and other cryptocurrencies through their retirement accounts. He claims that BitcoinIRA has over 170,000 active users, 60+ currencies available, and $1.2 billion in bitcoin assets on its platform.
What spillover benefits the financial services industry might see with a successful launch and growth of these new ETFs?
Let’s face it, when there’s demand in the market for an asset institutions take notice and use their influence to profit. And the demand for crypto ETFs is there – BlackRock’s spot bitcoin ETF broke a record when it reached $10bn in assets in just 49 days. It’s now climbed to $20bn in assets under management (approximately 300,00 BTC) and the recently approved Ethereum ETF has also received a warm reception from Wall St, signaling to the broader market that there’s mainstream interest in crypto as a way to diversify wealth.
The initial impact of both the Bitcoin and Ethereum ETFs have been a surge in prices for both assets, but I expect the benefits to spillover to the entire financial services industry in a few different ways.
Firstly, I think these ETF products will continue to see positive inflows, drawing in both retail and institutional investors who were previously hesitant due to their unfamiliarity with direct crypto investment. Increased investment in historically volatile crypto assets could lead to higher trading volumes which would drive revenues for brokerages and exchanges.
Additionally, as crypto ETFs become integrated into traditional investment portfolios, savvy financial advisors and wealth managers will have the opportunity to educate their clients about a new asset class and the different ways to invest in crypto and diversify their portfolios.
Moreover, the development of infrastructure to support crypto ETFs, such as custodial services and regulatory frameworks, could stimulate job creation and innovation within the financial services sector.
Does this open the door for the introduction of new crypto products? What do you expect and why?
I’d say yes, absolutely. As crypto assets mature, so do the ways to invest in them. Looking back at 2016, there was only one option to directly hold bitcoin within a retirement account. Now, there are routes to hold crypto assets in nearly every type of financial account and the market is better for it.
This is critical for institutions to realize as their clients face uncertainty related to the amount of money they believe they’ll need to retire. In fact, Northwestern Mutual recently released a survey that highlighted the gap that many Americans believe they face when saving for their retirements – finding that the typical worker believes they’ll need $1.46 million to retire comfortably — a jump of 53% from their savings target in 2020.
As investor interest in cryptocurrencies continues to rise and their desire to reach this threshold only increases, financial institutions may seek to capitalize by offering a broader range of investment vehicles. I’m bullish that the introduction of crypto ETFs will catalyze a wave of innovation in the crypto financial space, especially as institutions strive to meet the evolving needs and preferences of their customers.
