Marquee at the main entrance of the BlackRock headquarters building in Manhattan.
Eric McGregor | Lightrocket | Getty Images
SALT LAKE CITY — A year ago, Samara Cohen thought there was so much demand for bitcoin that she and her team at BlackRock launched one of the first bitcoin spot-traded products in the U.S. Now investors are flocking in, and many of them are cryptocurrency enthusiasts who are new to Wall Street.
Cohen, who runs the asset manager’s exchanges and equity investments as chief investment officer, told CNBC that BlackRock now sees that the demand was for a better way to access bitcoin. “It was about the ETF wrapper,” he told CNBC on stage at the Permissionless Conference in Utah.
The combined market capitalization of all eleven spot bitcoin ETFs now exceeds $63 billion, with total flows of nearly $20 billion. In the last five trading days alone, spot bitcoin ETFs have seen net inflows of more than $2.1 billion, with BlackRock accounting for half of those sales.
The surge in trading volume comes as bitcoin hit its highest level since July this week, trading above $68,300. Bitcoin closed the third quarter up about 140% year-over-year, outperforming the S&P 500 as these spot token funds and the cryptocurrency market cap move higher in lock-step. Crypto-aligned stock Coinbase closed about 24% this week, its best week since February.
Cohen told CNBC that part of the strategy to attract clients to his funds was teaching crypto investors about the benefits of exchange-traded products (ETPs).
The 13F filings, which provide quarterly readings on stock positions taken by large investors, show that 80% of buyers of these new U.S. spot bitcoin products are direct investors. Of the 80% of direct investors, Cohen told CNBC that 75% had never previously owned an iShare, one of the best-known and largest ETF providers on the planet.
“So we started this journey with the expectation that we needed to educate ETF investors about cryptocurrencies and specifically bitcoin,” Cohen said. “As it turns out, we’ve done a lot of educating crypto investors about the benefits of the ETP wrapper.”
Before the US Securities and Exchange Commission bitcoin funds greenlit in January, investors had a few ways to buy and hold cryptocurrency. A central exchange like Coinbase was among the most user-friendly options for US investors. But the successful debut of bitcoin ETPs revealed to Cohen and others on Wall Street that crypto exchanges weren’t giving digital asset investors everything they needed.
It helps that the US is a huge market for digital assets. New data from Chainalysis shows that North America remains the largest crypto market globally, accounting for nearly 23% of total cryptocurrency trading volume. The blockchain analytics platform estimates that between July 2023 and July 2024, $1.3 trillion in value was received on-chain.
Venture capital firm a16z found in its recently released State of Crypto report that more than 40 million Americans own crypto.
So far, adoption has been primarily through wealth management clients asking advisors to add new spot crypto products to their portfolio.
In August, Morgan Stanley became the first major bank to allow its 15,000 financial advisers to introduce bitcoin ETFs from BlackRock and Fidelity to clients with a net worth of more than $1.5 million. Other companies still perform internal due diligence before allowing their SA armies to actively begin disposing of funds.
“Wealth Manager distributors have not distributed,” VanEck CEO Jan van Eck told CNBC in Utah. “I mean, they’re barely getting warm.”
Van Eck drew parallels with the European market, where the company has 12 products based on brands traded in Europe.
“It’s exactly what we’re seeing in Europe,” he said. “Very few private banks have actually approved investments in bitcoin or ethereal or anything else in a significant way.” Van Eck said his firm has about $2 billion in European crypto ETPs, and much of that volume comes from individual investors.
Wall Street needs rules from lawmakers on Capitol Hill before it can feel more comfortable with crypto.
ETFs create transparency
Cohen believes that in many ways, ETFs and blockchain technology solve similar things.
“ETFs have been a decentralizing force in the TradFi markets that brought much more access and transparency and, most importantly, really accelerated growth in the post-crisis period of 2008, 2009,” Cohen said, referring to traditional financial markets.
“I find it incredibly important to look at the fact that the bitcoin white paper was published on October 31, 2008, and then you will meet with the G20 leaders from around the world to discuss the consequences of the financial crisis and how you can create more transparency through public report,” Cohen continued.
BlackRock took less risk by using counterparty clearing and multilateral trading. In the TradFi markets, these moves created huge headwinds for ETFs.
“Then at the same time, DeFi is becoming a reality in the intervening 15 years,” he said.
“Was this a win for Bitcoin? Was this a win for ETPs? For me, the answer is: It’s a win for investors, to the extent that we can effectively marry these ecosystems that solve for the same goals.”