Survey suggests demand for a bitcoin ETF may not live up to the hype

Published Sat, Dec 16 20238:53 AM EST

Registered investment advisors will probably be the main driver of bitcoin ETF flows should one be approved in the U.S., according to Needham, but a survey conducted by the firm shows retail clients are showing little to no interest in crypto investing. With market expectations that the U.S. could see its first ever spot bitcoin ETF approved in January, Needham sought to find out whether investors would prefer bitcoin exposure through an ETF, crypto- related equities or trusts, or buying the cryptocurrency outright on a trading platform like Coinbase or Robinhood . It surveyed 20 financial advisors, 75 Coinbase users and more than 200 individuals. According to the results, the potential ETF would best serve advisors due to their limited ability to offer clients bitcoin exposure today. "The main driver of a Bitcoin ETF, in our view, will be RIAs," said John Todaro, an analyst at Needham. "With nearly half of our advisors answering that their current bitcoin offering is either nonexistent or directing clients to buy bitcoin on their own at a crypto platform, we believe this is where most new buyers would come from." The majority of advisors expect between just 5% and 10% of clients to own a bitcoin ETF if it becomes available. "Advisors are currently seeing mostly disinterest from clients around bitcoin and an ETF, but nearly all expect interest to pick up if bitcoin prices continue to increase," Todaro added. Despite suffering a 7% drop earlier in the week , the cryptocurrency has rallied through the fourth quarter as the drumbeat for a bitcoin ETF has grown louder . Investors are also looking forward to the Bitcoin halving in the spring, which is expected to push the bitcoin price higher over the ensuing months. And the Federal Reserve indicating Wednesday that there may be at least three rate cuts in 2024 only adds to the recent enthusiasm. Bitcoin has advanced 59% over the past two months, and has soared 157% in 2023. BTC.CM= YTD mountain Bitcoin (BTC) has gained more than 150% this year However, the survey also showed that investors who haven't already bought bitcoin aren't likely to now just because an ETF is available. "Any person that has not purchased bitcoin already is currently unlikely to buy a bitcoin ETF," Todaro said. "Just 11% of respondents who have not owned bitcoin in the past described themselves as very likely or somewhat likely to buy a bitcoin ETF." At the same time, among existing bitcoin holders more (49%) indicated they'd prefer to buy their crypto on an exchange like Coinbase rather than through a prospective ETF (40%). The difference is modest but it bodes well for Coinbase, which has custodial partnerships with several of the potential bitcoin ETF issuers but generates higher revenue from trading, Todaro noted. It makes the outlook for Robinhood, which offers stock and crypto trading, mixed because the company sees a greater take rate from bitcoin transactions than equities. —CNBC's Michael Bloom contributed reporting.