To buy, or not to buy? That's the Shakespearean dilemma facing advisors now that the market has gone from a bitcoin bonanza back to business as usual.
The VanEck Bitcoin Trust ETF (HODL) was one of 11 spot bitcoin ETFs that started trading last Thursday. After years of planning, anticipation and regulatory filings, HODL finished its first day on the public markets at a price of $52.92 on volume of 482,500 shares.
In the week since its debut, the shares have fallen 8% to $48.46, while daily volume has steadily dropped to about a quarter of the exchange-traded fund's opening day action.
So after all that effort to get HODL (short for “hold on for dear life” among crypto cognoscenti) and other bitcoin ETFs up and running, what should advisors be thinking about when considering the crypto space for clients?
Matthew Sigel, head of digital assets research at VanEck, said advisors should use this time to leg into the world's best-performing asset over the past one, three and five years, and do it in an extremely cost-effective manner. Sigel estimates these ETFs will provide more than a 50% cost savings to the end investor compared with doing a retail transaction on a site like Coinbase.
“We're very encouraged with how these products are trading in the market,” he said. “The bid-ask spreads have come down a lot. They're trading at very minimal discounts or premiums to NAV, and there's plenty of volume for advisors to get access.”
As to where spot bitcoin ETFs like HODL fit in a client's portfolio, Sigel said that right now the buyers are mostly speculators. Nevertheless, as the investing public grows more comfortable with crypto as an asset class, and an uncorrelated one at that, he expects advisors to find more deliberate places for it in client portfolios.
“We expect that over the course of this year, brokerages and banks will increasingly come out with asset allocation models that incorporate bitcoin, perhaps taking 1 to 3 percentage points out of the fixed-income bucket into this store of value with a fixed supply, not subject to the money printing of the Federal Reserve,” he said.
And as to what makes HODL better or worse than other spot bitcoin ETFs on the market, Sigel believes the VanEck offering promotes true long-term investing and belief in the future of crypto.
“HODL is really a term that means buy and hold, so we think that's something that can resonate with investors,” he said. “We've put a lot of effort into education and table-setting in this space. We've made the largest seed investment off of our own balance sheet of any sponsor to date. We're donating 5% of the profits back to the open-source bitcoin developer community and we see a lot of opportunity to educate on this product for the institutional customer base as well.”
Finally, Sigel said the success of HODL and other spot bitcoin ETFs opens the door for the next generation of crypto ETFs. VanEck's spot Ethereum ETF is first in line on the SEC's waiting list.
“Hopefully there will be other spot crypto ETF products on the market later this year,” he said.
Perhaps by that time a new crypto ETF will be no big deal for issuers, advisors and investors – or at least not as big as the spot bitcoin ETF was last week, before it became just another buy or sell.
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