By Sean Allocca, in The Daily Upside, featuring Brian Spinelli, CFP®, AIF®, Co-Chief Investment Officer
Crypto investors are champing at the Bitcoin.
The world’s largest cryptocurrency is flirting with the almighty $100,000 record and is expected to soar as a new pro-crypto presidential administration settles into the Oval Office. All the hoopla has asset managers in a frenzy to launch new and innovative digital asset products. Crypto ETFs have pulled in billions since the election, and new products that deal in lesser-known currencies, or even option calls, are available or in the works. While the offerings give investors unprecedented access, some are leaning into riskier and more speculative strategies. They’re also catering to crypto’s “degen” crowd — a self-proclaimed group of degenerate traders that were born out of the meme-stock era.
“The ETF industry is using this as an opportunity to throw spaghetti at the wall,” said Roxanna Islam, head of research at VettaFi. “I expect to see more actively-managed, leveraged, and options strategies over the next few months.”
Just Speculating
Issuers have now applied to set up funds that track Solana, XRP and Litecoin, and the next generation of crypto ETFs could focus on a whole host of digital tokens, sometimes using leveraging or quant strategies. “ETF sponsors will push for any new product to get approved by the SEC so they can try to gather assets and market share,” said Brian Spinelli, Co-CIO at Halbert Hargrove. “It’s essentially a guess on investor behavior.”
Some of the most popular ones include commodity futures pegged to crypto that earn yields, as well as others that offer downside protection, according to Bloomberg. “I also suspect that the more speculative the product, the higher the probability of investor disappointment,” Spinelli told the Daily Upside.
While there seems to be a slew of new products in the works, not all of them are geared toward retail investors. Leveraged products will most likely be utilized by institutions and experienced day traders — degen or not. “Even if we see the SEC relax its guidelines, certain brokerage firms still have restrictions,” Islam said.
Never Pay Retail. Still, investors in the US poured $6.5 billion into spot Bitcoin funds in November alone, as the price rallied roughly 45% to touch a record $99,000. The month-long bull run resulted in just $411 million of outflows last month, according to Cointelegraph. The data also found:
- BlackRock’s IBIT brought in $5.6 billion of investments in November, accounting for almost 87% of the total monthly inflows.
- Other prominent firms also rode the crypto wave, like Fidelity’s Wise Origin Bitcoin Fund that topped $962 million.
- Continued inflows from institutions and private investors are expected to support the run. “Retail investors still face roadblocks,” Islam said.
