(Kitco News) – The launch of spot Bitcoin (BTC) exchange-traded funds (ETFs) in January has fundamentally altered the cryptocurrency landscape and changed the way numerous asset managers view the top crypto, with many now seeing BTC as a legitimate store of value.
Included on that list is David Solomon, the chief executive of Goldman Sachs, who told the panel on CNBC’s ‘Squawk Box’ that, while he has never been a critic of BTC, his main concern has been its speculative nature.
“I've always said I think it's a speculative investment,” Solomon said during an interview at the Summer Olympics in Paris, France. “I don't see a real use case.”
While Solomon has reservations about Bitcoin, he sees promise in the underlying technology, describing it as “super interesting” and capable of reducing friction in the financial system as it becomes increasingly digitized.
When CNBC’s Joe Kernan asked about the recent discussions regarding Bitcoin being labeled as a strategic reserve asset like gold, Solomon responded, “There very well could be a store of value case.”
These comments from Solomon were not surprising as he helped spearhead the launch of a crypto trading desk in 2021, at the time saying, “Bitcoin is on an inevitable path to have the same market capitalization and then a higher one than gold.”
Over the past five years, Bitcoin has increased roughly 490%, while gold has increased 67%.
Despite Solomons's tepid responses on CNBC, Goldman Sachs remains committed to digital assets and plans to roll out three tokenization projects by the end of the year, targeting both the U.S. and European markets.
Helping to strengthen the case for Bitcoin being labeled a strategic reserve asset has been the performance of Bitcoin ETFs, which broke inflow and trading volume records in the months following their launch.
According to Samara Cohen, chief investment officer for ETFs at BlackRock, digital currency-backed ETFs will likely make their way into “model portfolios” toward the end of 2024.
“What will happen toward the end of this year and into next year is we will see allocations into model portfolios, which will give us much more of a steer into how investors are using them,” Cohen said during an interview with Bloomberg on Monday.
Cohen’s answer was in response to a question about what stage of the process big wirehouses such as Morgan Stanley, Wells Fargo, and UBS were at when it comes to onboarding and promoting crypto ETFs. She said these wirehouses are now conducting risk analytics and due diligence and looking at the roles of Bitcoin and Ethereum (ETH) in their portfolios.
Clients of these large, full-service brokerage firms often prefer to use the model portfolios they offer because they generally take a diversified approach to investing, targeting a balance of risk and return based on a transparent strategy. They essentially serve as ready-made templates for investing that take care of the background research for investors.
According to Salim Ramji, global head of iShares and index investments at BlackRock, the asset manager expects the model-portfolio sector of money management to grow from $4.2 trillion currently to $10 trillion over the next five years.
“It’s going to be massive,” he told Bloomberg. “It’s the way in which more and more fiduciary advisers are doing business, and, as a result, that’s the way in which we’re doing business with them.”
Cohen noted that while Bitcoin and Ether are very different assets with different use cases, they are both useful as “portfolio diversifiers.”
WisdomTree CEO Jonathan Steinberg also believes that Bitcoin and crypto are on the brink of “mainstream” adoption and will achieve that status within the next few years, citing regulatory clarity, the emergence of publicly traded crypto funds, and the tokenization of real-world assets (RWAs) as the primary catalysts of this trend.
“I think that will have a very positive effect on not just crypto, the asset class – which is really only half the story – and blockchain-enabled finance, which WisdomTree is a very early leader in,” he said during an interview with CNBC Monday.
“It’s 15 years that Bitcoin has been in the marketplace,” he added. “It’s the best-performing asset class, even better than private equity. What’s so interesting about Bitcoin, with no employees and no institutional buying, it’s raised more than a trillion dollars. And now, crypto as an asset class is well over two trillion dollars. I think it’s going mainstream in the years ahead.”
Steinberg said if not for actions taken by regulators, mainstream adoption of cryptocurrencies could have likely already happened.
“It’s been particularly scary for some investors because you have retail investors with a great passion for the asset class, but the regulators have been very skeptical, so it has been embraced but has not mainstreamed yet,” he said. “You are seeing it start to mainstream with the crypto ETPs that have been launching the Europe and the U.S., and that development will continue.”
He noted that the launch of ETFs “was very confusing to investors as well,” but said convenience, desire, and the normalization of terms will make the crypto industry “simpler for people to understand.”
“Crypto is an asset class, and then there’s this broader tokenization of all real-world assets,” he said. “We see it all converging.”
Steinberg gave the analogy of phones to explain where this is all heading.
“You had your rotary phone, and eventually a cell phone and then a smartphone,” he said. “In money, you had gold and then paper money. We’re moving towards programmable money, which will really transform financial services broadly. It’s an exciting place to be, and WisdomeTree is an early player.”
