BlackRock’s bitcoin spot ETF (IBIT), which had experienced 71 consecutive days of net inflows, saw net outflows for the first time yesterday, according to CoinDesk. Robert Mitchnick, Head of Digital Assets at BlackRock, stated that a new wave of activity from different types of investors may follow the current period of intermittent outflows. Mitchnick further mentioned that in the coming months, financial institutions such as sovereign wealth funds, retirement funds, and charitable funds may begin trading bitcoin spot ETFs. BlackRock is witnessing a resurgence in discussions surrounding bitcoin, with topics including bitcoin allocation and how to approach it from a portfolio construction perspective. Some large brokers, such as Merrill Lynch and Wells Fargo, have started offering channels for clients to invest in bitcoin spot ETFs, but this is limited to active purchases, meaning clients must consult their advisors for investment matters. Morgan Stanley is reportedly considering expanding the sales of bitcoin ETFs by allowing its approximately 15,000 brokers to solicit client purchases. Currently, a significant portion of IBIT’s assets come from investments replacing Grayscale, while other sources may include outflows from higher-priced international products in Canada or Europe, as well as funds transferred from bitcoin futures ETFs to spot products. Mitchnick stated that some existing bitcoin holders prefer holding cryptocurrencies in brokerage accounts without having to worry about custody, tax complexities, and other challenges associated with holding bitcoin on exchanges. Mitchnick also mentioned that while becoming the largest bitcoin spot ETF would be an impressive milestone, BlackRock is not focused on this competition but rather on educating clients. BlackRock has shown interest in crypto assets, stablecoins, and tokenization, as evidenced by its submission of an Ethereum spot ETF application in November last year. BlackRock CEO Larry Fink has also discussed the potential of tokenization (i.e., traditional assets represented on the blockchain) in the media on multiple occasions. However, given the complexity of the Ethereum blockchain ecosystem, the Ethereum ETF raises questions about how BlackRock will educate clients. Additionally, if investors’ portfolio Sharpe ratios have already improved due to bitcoin spot ETFs, why would they want exposure to another cryptocurrency ETF? Mitchnick stated:
