With the launch of the first spot Bitcoin (BTC) exchange-traded funds (ETF) now official, the debate has now shifted from adoption by retail investors to adoption by institutional investors, and one analyst thinks that Independent Financial Advisors (IFA) will play a big part in bringing billions of dollars into the most valuable digital asset.
Ric Edelman, founder of the nation's largest registered investment advisory firm, sees IFAs investing $150 billion in spot BTC ETFs over the next two to three years, which would make these ETFs the most successful in the history of the asset class.
“Our research shows that 77% of independent advisors plan to allocate an average of 2.5% of clients' portfolios to spot Bitcoin ETFs,” Edelman said. “Since Independent Registered Investment Advisors collectively manage $8 trillion, that translates to $154 billion.”
Edelman said the inflows from institutional investors will help propel Bitcoin’s price to $150,000 within two years, representing an increase of more than 220% from its current price of $46,400. But the gains will take time, he warned, so investors need to manage their expectations.
“It's going to take time for asset flows to occur,” Edelman said. “Firms need time to put these new ETFs onto their platform, and compliance departments need to establish policies governing their use. Advisors all need training, because most are unfamiliar with blockchain technology, and they don't know how to explain bitcoin to clients.”
“Advisors are also going to need time to tackle the big tactical questions,” he added. “Advisors have to determine which of their clients should invest in these ETFs, and determine the best allocation for them. Advisors need to decide how they'll communicate their recommendation to clients.”
It will take time to educate advisors and bring them up to speed on the various facets of the crypto ecosystem, he said, which is why he expects a lag time for large inflows to make their way into the spot BTC ETFs.
“In the long term, I fully expect Bitcoin's price to be in the low to middle six figures, but it won't happen overnight,” Edelman said. “This makes Bitcoin an outstanding addition to a long-term diversified portfolio, using all the traditional investment strategies you've mastered over the years, such as rebalancing, dollar cost averaging and tax-loss harvesting. But triple-digit gains instantly? Everyone needs to temper their enthusiasm.”
While Edelman is bullish on Bitcoin adoption by IFAs, many of the large brokerage firms are not keen on the idea of offering access to spot BTC ETFs just yet, a list that reportedly includes Vanguard, Citi, UBS, and Merrill Lynch.
If only there was another way to accumulate Bitcoin
— Mandrik (@Mandrik) January 11, 2024
