Bitcoin ETF ‘not priced in’ as majority of financial advisors doubt approval in 2024 – Bitwise

As the hype surrounding the anticipated approval of the first U.S. spot Bitcoin (BTC) ETF continues to build, Bitwise Asset Management, the largest crypto index fund manager in the U.S., released the results of their sixth annual “Bitwise/VettaFi 2024 Benchmark Survey of Financial Advisor Attitudes Toward Crypto Assets,” which showed that less than half of financial advisors believe a spot Bitcoin ETF will be approved in 2024.

 

According to Bitwise, the survey included topics “ranging from advisors’ current crypto allocations and preferred investment vehicles to Bitcoin price predictions.” 

 

The 2024 survey “revealed persistent interest in crypto from clients, lingering barriers to access for advisors, and concerns about crypto regulation and volatility,” the report said. “Most notably, the poll suggested that the approval of a spot Bitcoin ETF could generate greater demand among investors than many expect.” 

 

Conducted between Oct. 20 and Dec. 18, the survey included responses from 437 financial advisors across the country, and found that “only 39% of advisors believe a spot bitcoin ETF will be approved in 2024.” This stands in stark contrast to the opinion of Bloomberg ETF analysts Eric Balchunas and James Seyffart, who give the likelihood of a January approval at 90%.

 

While the majority don’t see an ETF approval happening this year, “the vast majority see its approval as a major catalyst,” Bitwise said, with 88% of advisors who are interested in purchasing Bitcoin saying that they are waiting until after a spot BTC ETF approval to do so. 

 

88% of respondents also said they received a question about crypto from clients last year, but only 11% reported advisor-managed allocations for clients despite rising prices and interest. “That’s below 2022 (15%) and 2021 (16%), but above 2020 (9%) and 2019 (6%),” Bitwise said. 

 

One key reason why advisors have been unable to capture the recent crypto gains for their clients is that many of them are not authorized to allocate, with 81% reporting they were “either unable to buy crypto in client accounts or were unsure whether they could.”

 

Bitwise said the majority of individual investors took crypto investing into their own hands, with the advisors reporting that “well more than half (59%) of clients were investing in crypto outside their advisory relationship in 2023, the same proportion as in 2022. This compared to 68% in 2021, 36% in 2020, and 35% in 2019.”

 

The report said getting up to speed on facilitating crypto investments for clients is “a major business opportunity for the savvy advisor.”

 

When it comes to the level of exposure, the survey found that “86% of those with crypto exposure have less than 5% of their portfolios allocated to crypto,” which “suggests that, for the vast majority of advisor clients, crypto plays an important but supporting role in their portfolios.”

 

 

“Another key finding was how advisors who have already allocated to crypto differ in their approach from those who have not,” the report said. “Of those advisors who have not allocated for clients, 8% are definitely or probably planning on adding exposure in 2024, while an additional 21% are considering it,” while 71% said they are “definitely or probably not planning on adding exposure.”

 

For advisors who have already allocated to crypto in client accounts, 98% said they plan to maintain or increase the exposure. “This suggests a gap between advisors who already have exposure – and therefore may have greater firsthand knowledge of crypto’s opportunities and risk – and those who don’t,” Bitwise said. 

 

Among advisors who allocate, the size of the allocation is also rising. Large crypto allocations (more than 3% of a portfolio) more than doubled, rising from 22% of all client portfolios with crypto exposure in 2022 to 47% in 2023.

 

As for their personal investments, 34% of all advisors reported owning crypto assets in their portfolios. That was down from 37% in 2022 and 47% in 2021, but well above the 24% in 2020 and 17% in 2019.

 

“When asked which exposures they’re most interested in for 2024, financial advisors indicated crypto equity ETFs were their top choice (28%), a testament to the important role stocks and the familiar ETF wrapper can play in crypto investing,” the report said. “Given the large percentage of advisors who either cannot buy crypto in client accounts or are unsure whether they can (81%), crypto equity ETFs may be attractive for the easier and more familiar form of exposure they provide than direct crypto asset holdings.”

 

Bitcoin was identified as “the most interesting area of the crypto market” by 37% of advisors, while 25% said Ethereum, 14% said crypto equities, 9% said DeFi, 9% said web3 and the Metaverse, and 5% said non-fungible tokens (NFTs). 

 

“Advisors are substantially more bullish on Bitcoin than Ethereum heading into 2024, with 71% preferring the former,” the report said. “This is up from just 53% last year, and is likely reflective of Bitcoin’s strong performance in 2023 and positive sentiment around a potential new ETF.”

 

When it comes to the biggest barriers to allocating, 64% cited regulatory uncertainty as a barrier to greater crypto adoption in portfolios, followed by volatility, which was identified as the most pressing concern by 47% of respondents. 

 

“The big takeaway from these advisors this year is that, for all the hoopla surrounding the potential approval of a spot bitcoin ETF, it doesn’t appear to be priced in,” said Bitwise CIO Matt Hougan. “There’s a massive gap in expectations between advisors and those who monitor ETF developments for a living. Couple that with the fact that almost 90% of advisors say they’re waiting for an ETF before making a Bitcoin investment, and you see a lot of demand bubbling just below the surface.”