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The state of crypto ETFs: Permissionless edition
We’ve already noted there has been plenty of regulatory talk at Permissionless.
ETFs were also a major point of discussion following the milestone launches of US spot bitcoin and ether funds in January and July, respectively.
The bitcoin ETF chatter focused, in part, on the buyers driving the so-far $18.6 billion of net flows into the segment.
“The industry had an expectation that was summed up by: ‘Here come the boomers,’” Bianco Research’s Jim Bianco said during a panel discussion. “I don’t think it’s really been that at all.”
Rather, he and fellow panelist Bloomberg Intelligence analyst James Seyffart, noted that a large chunk of that money has come from existing digital wallets.
Indeed, Samara Cohen, BlackRock’s CIO of ETF and index investments, noted that 75% of buyers of the iShares Bitcoin Trust (IBIT) had never bought an iShares product before — signaling many IBIT holders are more crypto native investors.
While a number of wealth managers have jumped into these products, many more remain on the sidelines. Morgan Stanley has allowed its financial advisers to offer the BlackRock and/or Fidelity bitcoin ETFs to certain clients, but other wirehouses have not yet followed suit.
“Really what they want to look at is who are the right investors, what’s the right level of liquidity needs, risk tolerance…and what’s the role bitcoin might play in a portfolio so they can recommend an appropriate allocation,” Cohen said. “That’s not a trivial exercise with relatively limited trading data and a pretty interesting market backdrop over the last few years.”
Seemingly more involved than wealth managers in bitcoin ETFs right now are hedge funds that are executing basis trades, Permissionless speakers have noted. That means they are taking positions in both the BTC spot and futures markets in a bid to profit from price differences.
As for the spot ether ETFs, Seyffart acknowledged his flow estimate for those funds (at between 15% and 25% those of the BTC funds, in the first year) appears to have been “way too bullish.”
Those US ETH products have so far seen net outflows amounting to $548 million.
A few reasons for this include the product launches occurring during the summer “doldrums,” ETH’s price trajectory around the launch and the need for more education around the asset.
And, of course, the ETFs can not yet stake the ETH that they hold.
“People who understand this and are staking their ETH would never go to an Ethereum ETF because you’re giving up that 3% or 4% yield,” Seyffart said. “You lose more utility by taking Ethereum and putting it in an ETF wrapper than you do taking bitcoin and putting it into an ETF wrapper.”
— Ben Strack
13.75%
The amount MicroStrategy shares were up on Friday, as of 2:15 pm ET. The business intelligence firm’s stock price is now at a 52-week high.
The run-up comes as MicroStrategy founder Michael Saylor announced plans to launch a bitcoin bank during a recent interview with research firm Bernstein. MicroStrategy currently holds 252,220 BTC.
Did You Notice
Happy Friday! Inflation data this week came in above expectations, painting an uncertain picture as investors and analysts continue to speculate about what we might see from the Fed in November. Here are the highlights:
- Thursday’s CPI report came in hotter than expected. As Felix said yesterday, the report wasn’t smoking hot, but left much to be desired. We’ll call it warm. Core CPI rose 0.3% month over month, vs. the 0.2% that analysts expected. Annually, core CPI came in at 3.3%, just above the forecasted 3.2%. Same with headline CPI, which was up 0.2% from the prior month and 2.4% year over year, compared with 0.1% and 2.3% expected, respectively.
- Friday’s PPI report showed core PPI inflation rose to 2.8% annually. Analysts had called for 2.7%. The monthly increase for the core index showed a 0.2% increase in line with forecasts. Neither the PPI nor the CPI are the Fed’s top inflationary gauge, but they are still important data points to note.
- The University of Michigan published its Survey of Consumers on Friday, showing sentiment dropped 1.7% from September to October. At the same time, near-term inflation expectations increased to 2.9%. It’s the highest inflation expectation we’ve seen since the summer.
— Casey Wagner
Bulletin Board
- Coinbase Chief Policy Officer Faryar Shirzad said during a Permissionless panel that Donald Trump is “very committed to the crypto issue” and that the Harris campaign “has done a really good job in beginning to talk to us.” We asked the executive about some other things; check Blockworks.co next week for our full interview with Shirzad.
- Bitcoin’s price surged above $62,900 by 2 pm ET — up more than 4% from 24 hours prior.
- After notching $245 million of net inflows on Monday, the US-listed spot BTC funds endured three straight days of outflows this week (amounting to a combined $140 million), Farside Investors data shows. Flows into the US ETH products have been roughly flat since Monday.
- Permissionless is wrapping up today, but Blockworks’ DAS is coming back to NYC from March 18-20, 2025! Early bird tickets are available now.