Chris Rhine, Head of Liquid Active Strategies at Galaxy, joined Keith Black, Managing Director of RIA Channel, to discuss bitcoin and Ethereum ETFs.
Financial advisors might find it challenging to access crypto assets for their clients, but the launch of bitcoin and Ethereum ETFs makes the task a bit easier. Bitcoin and Ether had strong price performance in the first half of 2024, partially driven by over $10 billion in net inflows into bitcoin ETFs. Digital asset ETF flows are coming from both individual and institutional investors.
Due to digital assets’ substantial volatility, position sizing is important. Advisors who recommend ETF products to their clients often suggest an allocation between 1% and 5% of assets, which varies with the client’s risk tolerance.
With the recent launch of Ethereum ETFs, advisors need to differentiate between bitcoin and Ethereum. Bitcoin serves as a store of value asset using proof-of-work mining, while Ethereum provides computing services and operates using a proof-of-stake validation process. Owners of Ethereum tokens can earn rewards for staking their tokens with a validator, but staking yield cannot yet be earned in the Ethereum ETFs.
Independent financial advisors may offer private funds to their clients, opening the doors to a variety of strategies, including venture capital. While bitcoin and Ethereum comprise over two-thirds of the market cap of the digital asset universe, other digital assets are not yet available in public funds, so must be accessed in the spot market or through private funds.
Resources: