Spot Bitcoin ETFs have overcome the long-standing barrier of entry to crypto by placing bitcoin in brokerage and advisor accounts already used for stocks and bonds. Two and a half years later, panelists at CoinDesk’s Consensus Miami conference agreed that some of it worked. However, they said custody concentration, modest reliance on counselors and back-office plumbing all remain unresolved issues.
Christopher Russell, head of strategic planning and analysis at Calamos Investments, described the access victory in numbers. “The ETF solved a big problem, which was access,” he said. The dozen U.S. spot Bitcoin ETFs now hold about $107 billion in combined assets, with about $20 billion in institutional hedge funds, $12.5 billion allocated by registered investment advisors and 60% in direct retail accounts.
Of the $146 trillion in assets under management managed by advisors, that $12.5 billion allocation “seems like a big number, but it’s a very small number,” Russell said. He highlighted what he called the 1% problem: “They can take a 1% position in a 50-60 volume asset, but they don’t want to spend 50% of their client meetings explaining why a 1% position fell 50%.”
Jean-Marie Mognetti, CEO and co-founder of CoinShares, insisted on the structural side. “Right now, they all use a single custodian, Coinbase, which creates massive concentration risk in the market,” he said. “From a protection and diversification perspective, it’s a zero. If you were in a hedge fund, you would want to use a number of prime brokers to diversify your risk.”
Mognetti’s warning concerns a market that is no longer uniformly single-custodian, but where Coinbase remains a central part of ETF infrastructure. Fidelity’s FBTC uses Fidelity Digital Assets, VanEck’s HODL launched with Gemini and later added Coinbase, BlackRock’s IBIT added Anchorage Digital Bank alongside Coinbase, and Morgan Stanley’s proposed Bitcoin ETF names Coinbase Custody and BNY as Bitcoin custodians.
Aaron Dimitri, general counsel for digital assets at Flow Traders, said ETFs have moved bitcoin from pure buy-and-hold exposure to broader portfolio construction. “You don’t just buy and hold an asset and hope it will appreciate over time,” he said. “You are able to integrate yield products, different structured vehicles.” For institutions, Dimitri said, ETFs don’t remove bitcoin’s volatility, but they make exposure and management easier. “If you’re going on a roller coaster, you might as well make sure the lap belt locks before takeoff,” he said.
Simeon Hyman, global investment strategist at ProShares, argued against treating volatility as a problem to be solved. “Volatility is a feature, not a bug,” he said, citing bitcoin and ether up 20% since the start of the Iran war. If an asset is volatile but isn’t closely correlated to stocks and bonds, “you sprinkle a little bit in there and you’re going to improve the efficiency of the Sharpe ratio,” Hyman said. “But you have to be willing to tell the story.” He also argued that futures products retain a role: ProShares’ BITO, launched in October 2021, holds about $2 billion in assets but still trades at 35% of the daily volume of BlackRock’s IBIT, the dominant spot product.
The discussion takes place in a context of unstable demand. Strategy, the largest holding company in Bitcoin with 818,334 BTC, this week reported a first-quarter net loss of around $12.5 billion. CoinDesk reported that the company indicated it may sell Bitcoin to help meet its dividend obligations. The accumulation strategy has been widely considered one of the structural pillars of demand in the post-ETF era.
When asked for a five-year price target, Russell predicted that Bitcoin would hit $1 million within five years, “but it’s not going to be a straight line.”
