The advent of spot bitcoin exchange-traded funds (ETFs) has marked a new chapter in financial markets, with BlackRock’s IBIT leading the charge as the fifth largest ETF by inflows this year. The rapid emergence of bitcoin ETFs raises the question of sustainability and whether the bullish forecasts by industry giants like Standard Chartered Bank and Fidelity can be met. However, one thing is clear: bitcoin ETFs have carved their niche on Wall Street.
Mike Willis, CEO and founder of ONEFUND, predicts that bitcoin will become a dominant topic on Wall Street in the coming decade, potentially matching gold’s market cap. ONEFUND, known for its $106 million INDEX ETF that mirrors the S&P 500, plans to launch “Cyber Hornet” funds, blending bitcoin and traditional equities to attract risk-averse retail investors.
Despite the excitement, Willis cautions against large crypto allocations, citing the legal risks financial advisers face due to the volatile nature of cryptocurrencies. He notes the challenge of managing client expectations during downturns, emphasizing the need for investment strategies that mitigate bitcoin’s volatility.
The imminent launch of ETF ZZZ by the SEC aims to balance investment in the S&P 500 and bitcoin futures, introducing a strategy to cushion against bitcoin’s price fluctuations. Willis suggests that hybrid funds incorporating U.S. Treasuries or other stable assets could help differentiate offerings in a crowded market, with 11 spot bitcoin ETFs approved simultaneously.
Competition among ETFs may intensify around management fees and how funds manage the underlying bitcoin investments, with strategies ranging from yield generation through rehypothecation to secure storage in cold wallets. ONEFUND, opting not to compete on fees, plans to assure investors of secure bitcoin storage in partnership with Custodia Bank.
Grayscale remains an outlier, maintaining a 1.5% fee for its GBTC product despite facing withdrawals since its ETF transition. Willis attributes the fund’s resilience to brand loyalty and a preference within the bitcoin community to support non-institutional entities, a sentiment ONEFUND aims to tap into with its “Cyber Hornet” branding and unique tickers for its ETFs.
As Wall Street embraces bitcoin ETFs, the landscape is set to evolve, potentially ushering in a new era of mainstream bitcoin investment. Willis envisions a future where bitcoin becomes an integral part of diversified portfolios, retirement accounts, and eventually, a mainstream asset class. The “bitcoin era” on Wall Street may well redefine the financial industry’s approach to digital assets, signaling a significant shift towards broader acceptance and integration of bitcoin into the fabric of global finance.
