After facing considerable delays, spot bitcoin exchange-traded funds (ETFs) have finally made their debut. BlackRock’s IBIT ETF has swiftly become the fifth largest ETF by inflows this year, closely followed by competing funds.
While it remains uncertain whether this rapid growth can match the bullish predictions from firms like Standard Chartered Bank and Fidelity for year-end ETF valuations, it’s undeniable that bitcoin ETFs have firmly established their presence in the market.
The key question now is how Wall Street will navigate this novel avenue for gaining exposure to bitcoin, and whether retail investors will seize the opportunity.
Mike Willis, CEO and founder of ONEFUND, believes that bitcoin could become one of the most prominent brands on Wall Street in the coming decade. Willis refrains from offering specific price predictions but suggests that bitcoin could eventually rival the market cap of gold.
In an effort to cater to risk-averse retail investors, ONEFUND is planning to launch a series of “Cyber Hornet” funds that blend bitcoin with traditional equities. Despite most wealth managers advising clients to allocate no more than 1%-3% to crypto, Willis highlights potential legal risks associated with even small allocations due to the cryptocurrency’s volatility.
The ETF closest to launch, known as ZZZ, aims to allocate 75% of its capital to the S&P and 25% to bitcoin futures (with an option for spot bitcoin holdings). This strategy seeks to mitigate bitcoin’s downside risk and volatility by investing in the widely held index strategy on Wall Street.
Willis anticipates the launch of hybrid funds that aim to protect against bitcoin’s volatility by investing in less risky asset classes like U.S. Treasuries. As competition intensifies with the approval of 11 spot bitcoin ETFs on the same day, firms are expected to compete on management fees, with some even offering fee waivers for promotional periods.
In terms of custody practices, while some funds may rehypothecate bitcoins to earn returns, ONEFUND plans to differentiate itself by guaranteeing in its prospectus that bitcoins will remain in cold storage. The firm aims to tap into the loyalty of bitcoin enthusiasts, similar to Grayscale’s GBTC product, which maintains brand loyalty despite charging higher fees.
Overall, Willis sees the advent of bitcoin ETFs as a pivotal moment that will catalyze mass adoption of bitcoin within traditional finance over the next decade, ultimately leading to its recognition as a mainstream asset class.
