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Waiting for a Crypto ETF

Last spring, Brown Brothers Harriman released its 2021 Global ETF Investor Survey which measures current trends in usage, selection, and demand for ETFs. The table below from that survey indicates the strong interest shown by investors worldwide in having options to invest in cryptocurrencies in an ETF structure. 

It seems clear that more investors are recognizing the growth potential of cryptocurrencies but would like a relatively less onerous way of investing in them that offers liquidity and potentially greater diversification.

Unfortunately, investors in the U.S. will have to wait a bit longer for a cryptocurrency ETF to make it to market. Late in June, and for the second time, the SEC extended the review of Van Eck’s bitcoin ETF, the first such offering in the queue. The SEC extended its review process, requesting further comment from interested parties on how its rule change could impact markets. SEC Chairman, Gary Gensler, remains concerned that cryptocurrency exchanges lack oversight and may be subject to fraud and manipulation. For now, investors are left with two options in terms of publicly traded vehicles, the Grayscale Bitcoin Trust which is a closed-end fund available to accredited investors, and a growing list of ETFs that invest in companies in some way associated with the blockchain. The oldest and largest of these, the Amplify Transformational Data Sharing ETF (BLOK) was introduced in 2018 and is now just over $1B in AUM.

While it’s anyone’s guess when a true cryptocurrency ETF will come to market, it’s likely that demand coupled with more stable markets will likely result in such products being available relatively soon. A number of well-regarded players have prototypes on the shelf and pent-up demand will probably help early entrants grow quickly.