Big Bank, Broker Interest in Bitcoin Is 'Accelerating', Says ETF Issuer VanEck

The appetite for Bitcoin among big financial institutions, including banks and brokerages, is "accelerating," as more of their clients show interest in Bitcoin ETFs, according to VanEck Head of Digital Assets Research Mathew Sigel.

And as more institutions move closer to considering these offerings, the chances to see further adoption of this new asset class expands with it. 

“We don’t see obstacles, we see opportunity,” Sigel said in an interview with Decrypt. 

Bitcoin’s relationship with Wall Street has been through its share of phases, from icy indifference to keen intrigue of the cryptocurrency’s potential. Now, with Bitcoin spot exchange-traded funds on the market—among them VanEck's Bitcoin ETF "HODL"—the relationship might be set to warm up again as more institutional clients express interest in investing in them. 

By any metric, the performance of the Bitcoin spot ETFs have been a historic success. On the first day of trading alone, there was $4.5 billion in trading, a massive start by any standard. Already, three of them—BlackRock, Fidelity and most recently Ark Invest’s 21Shares—have already accumulated more than $1 billion in assets, with BlackRock alone now holding just over $5 billion.

VanEck, whose spot ETF was among the 10 approved by the Securities and Exchange Commission on January 10, has about $175.7 million in assets under management, according to data from VettiFi. 

Sigel described the ETF's entry onto the market as a "smashing success in aggregate" for the record-breaking amount of inflows they have attracted. These inflows pushed up the price of Bitcoin, but it was hampered by outflows from Grayscale following its conversion from a trust into a spot ETF. With these outflows now appearing to slow, Sigel said that it opened "the potential to exceed expectations." 

Many of the trades being executed have been concentrated in retail, Sigel said, something in line with what other ETF issuers and analysts have reported. However, Sigel added that there have been conversations with banks and wirehouses to begin offering the spot ETFs to clients in response to increased demand. 

Institutions like these have been slow to offer these products on the discretionary portion of their clients portfolios unless specifically requested to do so, said Sigel. In a sign of demand to get into Bitcoin, a survey of financial advisors published by fellow ETF issuer Bitwise on January 4 found that 88% of respondents showed an interest in purchasing Bitcoin on behalf of their clients once an ETF became available.

The competition among ETF issuers has been especially fierce with 10 players that includes Wall Street heavyweights like BlackRock and Fidelity among them. This has prompted a number of them to cut fees ahead of and after the ETFs went online in a bid to outflank one another.

The trade-off of these cuts is that they can hurt profitability for issuers that may be lagging right now. Sigel, whose firm has a 0.25% fee similar to its rivals, said that he sees the current rates as "very competitively priced" and shouldn’t be an obstacle to further adoption. 

Instead, Sigel said that the important metric to watch instead is the price of Bitcoin, which will play a role in how profitable any ETF may be going forward. 

"ETF issuers are unlikely to shut down an ETF whose price has doubled," explained Sigel. "So we have to wait and see if custody and other costs decline before thinking of another price cut."

The price of Bitcoin is currently $52,480, the highest level seen since the last major price rally in late 2021.

Edited by Guillermo Jimenez