Bitcoin ETF catalyzing broader merge of TradFi, crypto: BlackRock exec

The US spot bitcoin ETFs have moved forward the broader coming-together of traditional finance and crypto, according to an executive at the world’s largest asset manager. 

Speaking at a panel during Blockworks’ Digital Asset Summit in London on Tuesday, BlackRock managing director Tony Ashraf noted the impact of having large financial players wrapping bitcoin into an ETF.

Going the other way, crypto industry firms and innovations are starting to evolve traditional finance via asset tokenizations, a process that involves bringing physical and financial assets on-chain. 

Read more: TradFi, DeFi convergence continues through tokenizing real-world assets

“We have a duality between traditional finance and crypto starting to manifest in a very different way because of the catalyst of [bitcoin] ETFs,” Ashraf said. “I think…we’re going to see more of that convergence happening in the future.”

BlackRock managed roughly $10 trillion in assets, as of Dec. 31. The company launched one of the 10 US bitcoin ETFs that hit the market on Jan. 11. 

That fund, the iShares Bitcoin Trust (IBIT), has so far dominated competitors from a net inflows perspective.

IBIT’s net inflows amounted to nearly $13 billion at market close Monday, BitMEX Research data shows. That is nearly double the second-best asset gatherer — Fidelity Investments’ Wise Origin Bitcoin Fund (FBTC) — with $6.9 billion. 

Grayscale Investments’ Bitcoin Trust ETF (GBTC), which remains the biggest fund in the space, has seen nearly $12.5 billion of net outflows thus far. 

Read more: Is it too soon to name BlackRock the bitcoin ETF segment winner?

Increased access to usher in new client segment

Ashraf argued one cannot underestimate the impact of who can now allocate to crypto given the approval of the US bitcoin ETFs.

“We have a whole new demographic of investors coming into this space who have a different way of perhaps buying, holding and using the ETF structure,” he said.

The 10 US spot bitcoin ETFs brought in about $2.5 billion of net inflows last week, a record for the segment. The category endured net outflows on Monday for the first time since March 1 — amounting to $154 million, according to BitMEX Research data.

Still, Bitwise Chief Investment Officer Matthew Hougan said on the Tuesday panel with Ashraf he expects assets under management in the US bitcoin ETFs could grow from roughly $50 billion today to hundreds of billions of dollars in the next few years. 

Initial interest in the funds has been through self-directed retail investors and registered investment advisers (RIAs). 

The bitcoin ETFs are not yet widely accessible on national account platforms — such as Morgan Stanley, Merrill Lynch, Wells Fargo and UBS — that are still in the process of approving the funds for their advisers, Hougan noted.

Read more: Restricting access to growing bitcoin ETFs becoming ‘hard to justify’

But the Bitwise CIO said he expects one or more of the major wirehouses to clear access to such funds in as little as a week from now.  

“You should think of the flows we’re seeing into these ETFs as like a spigot turned on 20%,” Hougan said. “There’s another 80% to go, and that process is going to take place for a while.”

Leon Marshall, CEO of Galaxy Digital’s European business, said during the panel that as allocations via RIAs and wirehouses increase, so too will liquidity.

This liquidity is likely to spur more interest from corporates, sovereign wealth funds and central banks, he added.  

“They’ll only get interested in an asset class once it reaches a certain assets under management,” Marshall said. “So bitcoin does benefit from an effect of, the bigger it gets, the more attractive it becomes as an asset class for new client segments.”

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