The introduction of spot bitcoin ETFs has successfully addressed the access challenge by integrating bitcoin into brokerage accounts traditionally used for stocks and bonds. This development was highlighted at CoinDesk’s Consensus Miami conference two and a half years after their launch. Despite this progress, panelists identified unresolved issues such as custody concentration, limited advisor adoption, and back-office integration.
Christopher Russell, strategic planning head at Calamos Investments, quantified the access benefit: ‘The ETF solved one big problem, which was access,’ he noted. The dozen US spot bitcoin ETFs currently manage around $107 billion in assets, with institutional hedge funds holding approximately $20 billion, registered investment advisors about $12.5 billion, and 60% held by direct retail accounts.
Russell highlighted the disparity within advisor-managed AUM, which totals $146 trillion, emphasizing that ‘the $12.5 billion advisor allocation seems like a big number but is really small.’ He described this as the 1% problem: ‘Advisors can allocate a 1% position in a 50-60 vol asset but are reluctant to spend half their client meetings explaining why it dropped by 50%. Jean-Marie Mognetti, CEO and co-founder of CoinShares, raised concerns about custody concentration. He stated that using one custodian, namely Coinbase, poses significant market risks: ‘From a protection and diversification standpoint, this is inadequate,’ he argued.
While the market has diversified beyond a single custodian model, Coinbase remains integral to ETF infrastructure. Fidelity’s FBTC uses its own digital assets platform, VanEck’s HODL initially partnered with Gemini before incorporating Coinbase, BlackRock’s IBIT added Anchorage Digital Bank alongside Coinbase, and Morgan Stanley’s proposed bitcoin ETF lists both Coinbase Custody and BNY Mellon.
Aaron Dimitri, general counsel for digital assets at Flow Traders, pointed out that ETFs have transitioned bitcoin from a mere investment vehicle to an integrated portfolio component. ‘ETFs allow for yield products and structured vehicles,’ he said. For institutions, while volatility remains, ETFs facilitate easier management of exposure.
Simeon Hyman, global investment strategist at ProShares, countered the notion that volatility is a flaw. He noted bitcoin and ether’s 20% rise since the Iran conflict began, stating, ‘Volatility adds value as it isn’t closely correlated with stocks or bonds.’ However, he emphasized the need for effective communication: ‘You can enhance Sharpe ratio efficiency with some volatility,’ Hyman said. He also maintained that futures-based products have a place in the market.
The conversation occurs amidst uncertain demand signals. Strategy, the largest corporate Bitcoin holder with 818,334 BTC, reported a $12.5 billion net loss for Q1 and hinted at potential bitcoin sales to meet dividend obligations, as per CoinDesk reports. This move could impact one of the post-ETF era’s key demand structures.
When asked about Bitcoin’s five-year price target, Russell predicted it might reach $1 million but not linearly.