70% of Financial Advisors Say They Would Invest Client Funds in a Crypto Spot ETF

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  • A Nasdaq survey of hundreds of portfolio managers last month found that 72% of respondents would consider deploying client funds into a Bitcoin spot ETF if approved by the U.S. Securities and Exchange Commission (SEC).
  • Both futures-based and spot ETFs offer the investment diversity of a mutual fund with the intraday trading flexibility of a stock, but a Bitcoin spot ETF would provide investors direct access to the actual cryptocurrency rather than a futures contract.
  • While there are currently several Bitcoin future-based ETFs available, there are no Bitcoin spot ETFs approved.

Most money managers believe that an SEC-approved Bitcoin spot exchange-traded fund (ETF) would provide enough legitimacy to warrant investing from individual accounts.

Findings from a Nasdaq survey of 500 financial advisors published last month show that 72% of respondents would likely invest client assets in crypto once a Bitcoin (BTC) spot exchange-traded fund (ETF) is approved in the United States.

While several Bitcoin futures-based ETFs are currently available for U.S. investors, the SEC has not yet sanctioned a Bitcoin spot ETF. A futures-based ETF and a spot ETF each provide the benefits of investment diversity from a mutual fund with the trading flexibility of a stock.

However, a Bitcoin spot ETF would provide investors direct access to purchase the crypto on the "spot" market at a real-time price. The futures-based ETF enables investing indirectly in Bitcoin using contracts to buy or sell BTC at a set date in the future.

Even though the survey results found strong interest in a Bitcoin spot ETF and passive investing in cryptocurrencies in general, survey participants were not optimistic that such investment vehicles will be approved this year. According to the researchers, 38% of those questioned said government approval would be likely, 31% shared it would be unlikely, while the remaining 31% were unsure.

Other findings of the survey of investment experts

The reported findings also showed that 86% of money managers who already invest in crypto expect to increase their allocations during the next 12 months, and half of that group already uses Bitcoin futures ETFs. Additionally, pro-crypto financial advisors said their ideal crypto portfolio percentage is 6% for clients interested in that asset class.

"Over the last decade, financial advisors have been focused on shifting assets into index funds. As they incorporate digital assets into their investment strategies, they are expressing strong interest in a similar vehicle that can offer broad asset class exposure for their clients," said Jake Rapaport, Head of Digital Asset Index Research, Nasdaq in the survey statement. "The vast majority of advisors we surveyed either plan to begin allocating to crypto or increase their existing allocation to crypto. As demand continues to surge, advisors will be looking for an institutional solution to the crypto question that now dominates client conversations."

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While many investors like the diversity of an ETF, with its trading flexibility of an equity, it may not be the best way to invest in Bitcoin or any type of cryptocurrency.

The irony of a Bitcoin ETF

Ultimately, there are much better ways to access select cryptos using familiar services such as PayPal or user-friendly cryptocurrency exchanges. What's ironic about both a spot or futures-based Bitcoin ETF is that both investment vehicles are completely contradictory and anathema to Bitcoin's founding principles and ethos.

The creator of Bitcoin invented the BTC cryptocurrency software as a way to sidestep middlemen that add unnecessary time and costs to financial transactions. Bitcoin was created to remove expense ratios, commissions, and hidden fees -- not adopt them as necessary evils to invest in virtual currencies.

Consider that each time you buy or sell a stock, you have to pay a commission. This is true for ETF transactions too. Depending on how often you might trade an ETF, you can pile up significant trading fees that erode your investment gains or add to your losses.

In addition to commissions, ETFs have expense ratios that are annual charges the brokerage fund levies to keep your account open. The expense ratio is a percentage of your holdings -- so the more you have invested in the account, the higher the annual charge that further eats into your earnings.

While future and spot ETFs are likely to drive broader crypto adoption in the future, once you spot all the fees and charges, you may say "WTF" to a crypto ETF and choose one of the lower cost ways to access cryptos.

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