Bitcoin and Ethereum ETFs to Join Model Portfolios

• BlackRock may add its Bitcoin and Ethereum ETFs to its model portfolio in months.
• BlackRock has maintained dominance in the ETF market with big bets on ETH.

Spot Bitcoin (BTC) and Ethereum (ETH) Exchange Traded Funds (ETFs) from BlackRock could be allocated to model portfolios by the end of this year. Samara Cohen, BlackRock’s Chief Investment Officer of ETFs and Index Investments gave the disclosure while speaking in a Bloomberg interview.

Companies Look Into BTC and ETH as Portfolio Diversifiers

According to Cohen, global financial institutions including Morgan Stanley, Wells Fargo, and UBS are currently assessing risk analytics and due diligence on BTC and ETH. Specifically, these firms are analyzing the utility of these cryptocurrencies as portfolio diversifiers.

For context, financial services firm Morningstar describes model portfolios as a collection of investments created by financial advisors. These investment vehicles consist of managed investment products like ETFs and mutual funds, typically crafted to help clients achieve their goals.

Creating a portfolio from the ground level can be difficult and intimidating for individual investors. As a result, some financial advisors offer model portfolios or pre-built collections of investments to assist clients get started with investing. Model portfolios are especially helpful for hands-off clients who want to invest but are too busy for investment research. Advisors can adjust these investments based on clients’ goals and risk tolerance.

Cohen forecasts allocations into model portfolios toward the end of this year and into 2025. This timeframe is expected to give BlackRock a better understanding of how investors are utilizing the investments. The investment manager anticipates that model portfolio management will increase from $4.2 trillion to $10 trillion over the next five years.

“It’s going to be massive,” stated Salim Ramji, BlackRock Global Head of ETFs and Index Investments, adding that, “It’s the way in which more and more fiduciary advisors are doing business, and, as a result, that’s the way in which we’re doing business with them.”

BlackRock In Bitcoin and Ethereum ETF Market

Eleven issuers were approved by the US Securities and Exchange Commission (SEC) to commence spot Bitcoin ETF issuance in January. Since the launch, these investments have recorded increasing inflows which have fueled price gains for BTC. As highlighted in our earlier report, the price of BTC rose to $66,000 in July, amid a rebound in the ETF market.

Notably, BlackRock iShares Trust (IBIT) has solidified its position as a top market player, 

consistently attracting a substantial amount of inflow. As noted in our earlier post, IBIT recorded a new milestone with inflows surpassing $19.5 billion.

 Meanwhile, BTC has been trading sideways in the past week. At press time, the coin declined by 2.7% in the past day, to trade at $64,377. However, the trading volume increased by 26.8% to $36 billion.

Per Ethereum ETFs, BlackRock plans to purchase discounted Grayscale Ethereum Trust (ETHE) shares. According to our recent analysis, this situation is similar to when the firm bought discounted shares of the Grayscale Bitcoin Trust (GBTC) prior to the IBIT launch.