Marquee at the main entrance to BlackRock’s Manhattan headquarters.
Erik McGregor | Light flare | Getty Images
SALT LAKE CITY — A year ago, Samara Cohen thought there was a lot of pent-up demand for bitcoin that she and her team at BlackRock launched one of the first ever Bitcoin spot exchange-traded products in the United States. Today, investors are flocking, and many of them are crypto enthusiasts who are new to Wall Street.
Cohen, who runs the asset manager’s exchange-traded funds and index investments as chief investment officer, told CNBC that BlackRock now sees the demand for a better way to access Bitcoin. “It was for the ETF packaging,” she told CNBC on stage at the unsanctioned conference in Utah.
The total market capitalization of the eleven spot Bitcoin ETFs now exceeds $63 billion, with total flows of nearly $20 billion. Over the past five trading days alone, Bitcoin spot ETFs have seen net inflows of more than $2.1 billion, with BlackRock accounting for half of those sales.
The surge in trading volume comes as Bitcoin hit its highest level since July this week, trading above $68,300. Bitcoin finished the third quarter up about 140% from the same quarter last year, outpacing the S&P 500, as these tokenized spot funds and crypto market cap rise in tandem. Crypto-Aligned Stocks Coinbase closed up about 24% this week, its best week since February.
Cohen told CNBC that part of the strategy to attract clients to his funds was teaching crypto investors about the benefits of exchange-traded products (ETPs).
The 13F filings, which offer quarterly readings of stock positions taken by large investors, show that 80% of buyers of these new Bitcoin spot products in the United States are direct investors. Of the 80% of direct investors, Cohen told CNBC that 75% have never owned an iShare, one of the best-known and largest ETF providers on the planet.
“So we went into this with the expectation that we would have to educate ETF investors about crypto and bitcoin in particular,” Cohen said. “It turns out we’ve done a lot of educating crypto investors about the benefits of the ETP wrapper.”
Before the U.S. Securities and Exchange Commission authorized spot Bitcoin funds in January, investors had several ways to buy and hold cryptocurrencies. A centralized exchange like Coinbase was one of the friendliest options for US investors. But the blockbuster debut of Bitcoin ETPs laid bare to Cohen and others on Wall Street that crypto exchanges weren’t giving digital asset investors everything they needed.
It helps that the United States is a huge market for digital assets. New Chainalysis data shows that North America remains the largest crypto market in the world, accounting for almost 23% of all crypto trading volume. The blockchain analytics platform estimates that between July 2023 and July 2024, $1.3 trillion in on-chain value was received.
Venture capital firm a16z found in its recently released State of Crypto report that more than 40 million Americans hold cryptocurrencies.
Adoption so far has primarily come from wealth management clients asking advisors to add new crypto cash products to their portfolio.
In August, Morgan Stanley was the first major bank to allow its 15,000 financial advisors to offer bitcoin ETFs from BlackRock and Fidelity to clients with net worths above $1.5 million. Other companies continue to conduct due diligence internally before allowing their armies of financial agencies to actively begin launching funds.
“The wealth manager allocators have not allocated,” VanEck CEO Jan van Eck told CNBC in Utah. “I mean, they’re barely warming up.”
Van Eck drew parallels with the European market, where the company markets 12 token-based products in Europe.
“This is exactly what we are seeing in Europe,” he said. “Very few private banks have actually approved investments in Bitcoin or ethereum or anything else significantly. » Van Eck said his company has about $2 billion in its European crypto ETPs, and much of that volume comes from individual investors.
Wall Street needs rules from lawmakers on Capitol Hill before getting comfortable with crypto.
ETFs create transparency
Cohen believes that in many ways, ETFs and blockchain technology solve similar problems.
“ETFs have been a decentralizing force in the TradFi markets that have brought much more access and transparency and, most importantly, really accelerated growth during the post-crisis period of 2008 and 2009,” Cohen said, referring to traditional financial markets.
“I find it incredibly significant to consider the fact that the Bitcoin white paper was released on October 31, 2008, and then G20 leaders from around the world are meeting to discuss the aftermath of the financial crisis and how to create more transparency through public reporting,” Cohen continued.
BlackRock took less risk by using counterparty clearing and multilateral trading. In the TradFi markets, these moves have created huge tailwinds for ETFs.
“At the same time, DeFi became a reality in the intervening 15 years,” she said.
“Is it a win for Bitcoin? Was it a win for ETPs? To me, the answer is: it’s a win for investors, to the extent that we can actually marry these ecosystems that have the same goals. “