Direct client demand driving growth in BlackRock's Bitcoin ETF so far

Client demand was the driving force behind Bitcoin exchange-traded fund (ETF) creation, and the funds are just beginning to pick up momentum, BlackRock head of digital assets Robert Mitchnick said at the Bitcoin2024 event. He was interviewed on stage by Bloomberg journalist James Seyffart.

BlackRock CEO Larry Fink was a vocal skeptic of cryptocurrency when Mitchnick was hired in 2018. Fink was subsequently “orange-pilled,” pivoting to call Bitcoin “digital gold” in a recent interview.

Digital assets require study

Mitchnick credited Fink himself for the change of heart. “Larry deserves a lot of credit for the time that he spent studying the space,” Mitchnick said. He added:

“If you are a student of financial history and geopolitics or you are a technologist, Bitcoin tends to come more easily, and Larry is very much both those things.”

Larger forces came into play as well. Mitchnick noted that, with or without regulatory clarity, crypto as an asset class and technology were clearly “here to stay.” They had institutional-grade infrastructure and “the final piece that helped push us over the top” was client demand.

Crypto ETFs are just beginning to find their client base

Bitcoin ETFs were the biggest and most successful ETF launches in history, Seyffart said. He estimated that 20-25% of BlackRock revenue flow this year has come from the iShares Bitcoin Trust (IBIT), placing it as the asset manager’s second most successful offering after the S&P500 ETF.

Mitchnick said direct investors led the demand when the ETF was introduced. BlackRock wealth advisory and institutional investors are still gathering momentum. “Those are much longer journeys and we're still only part way down that track,” he observed.

None of the large wealth advisory platforms, like Morgan Stanley, UBS and Merrill Lynch, have begun offering Bitcoin ETFs on a solicited basis yet, meaning that they will only offer the ETFs at the request of the client.

“Typically, that takes multiple years for a new ETF to get to that solicited status,” although “many of the largest platforms are accelerating their efforts to do so,” Mitchnick said. He thought the situation may begin to change this year. He estimated that the BlackRock Registered Independent Advisers who have adopted the ETFs are allocating 2-3% of funds to them.

Institutions move similarly slowly as they to research and due diligence on new assets, Mitchnick said.