On this week’s episode of ETF Prime, host Nate Geraci is joined by Tom Hendrickson, president of ETF Trends and ETF Database, to discuss a recent survey conducted with Bitwise Asset Management regarding advisor attitudes on crypto assets. Later, Dave LaValle, managing director, global head of ETFs for Grayscale Investments, is on to discuss the journey of attempting to bring a spot bitcoin ETF to market as well as the launch of their first ETF, the Grayscale Future of Finance ETF (GFOF). John Davi, founder and CIO of Astoria, closes the show by discussing the launch of the AXS Astoria Inflation Sensitive ETF (PPI) in an environment fraught with concerns over rising interest rates and historic inflation.
The discussion opens with Hendrickson explaining that advisors are fielding more questions and interest from clients regarding crypto than ever before. The survey was conducted by ETF Trends in December 2021 and polled over 600 advisors from all arenas regarding any crypto allocations they might have in client portfolios. It’s the fourth year that this survey has been conducted with Bitwise, allowing for the identification of trends emerging within crypto investing; in 2021, 94% of advisors reported receiving questions about crypto from clients, an increase from the 81% in 2020 and 76% in 2019.
“What’s really interesting here is that part of this is a real two-way street between advisors educating their clients but also the clients educating their advisors,” Hendrickson says.
The survey also found a growing number of advisors investing in crypto themselves, typically the first step in being able to understand crypto so as to be able to discuss and recommend it with clients. 60% of advisors reported that they were considering adding crypto exposure to portfolios this year, and over half are circumventing the lack of a spot bitcoin ETF by investing in crypto equities.
“The importance of this within the advisor community has never been higher, and frankly it will continue to get higher, I think, based on this data,” explains Hendrickson.
The Fight for a Spot Bitcoin ETF and Investing During Inflation
Dave LaValle, managing director, global head of ETFs for Grayscale, is on next to discuss their efforts to convert GBTC to a spot bitcoin ETF, which is currently open for public comments with the SEC. LaValle explains that most ETFs come to market by following the ETF Rule, which allows them to go to market without needing an exemptive order from the SEC if they meet certain qualifications. However, the converted GBTC would not meet the ETF Rule.
“This is different, this is a more novel exposure. It does not meet the ETF Rule, and so just like any other novel product that has come to market, it goes through a more rigorous filing process and a more rigorous review process by the SEC and ultimately is on the 240-day clock,” LaValle says. Grayscale has also filed a pre-action letter against the SEC saying that if they do not pass a spot bitcoin ETF, the company will sue for practices that are “arbitrary and capricious.”
LaValle also discusses the Grayscale Future of Finance ETF (GFOF), which he describes as a concentrated basket of exposures to the three pillars that the underlying index (constructed in partnership with Bloomberg) is built upon, which are the digital asset infrastructure, technology solutions, and financial foundations.
“This is an opportunity to invest in the infrastructure of the digital economy in a way that can be really valuable for investors to take some of the guesswork out of it,” LaValle explains.
Last on is John Davi, founder and CIO of Astoria Portfolio Advisors, talking about the launch of the AXS Astoria Inflation Sensitive ETF (PPI), an active ETF managed by Astoria that embraces an inflationary environment and invests in the energy, banks, materials, and industrials sectors primarily. It also gives a 10%-15% allocation to commodities, and a small allocation into TIPS to reduce volatility.
“The history and evidence says that when interest rates rise, high multiple stocks on the margins typically struggle, and sure enough, that’s what’s playing out,” Davi says. “I think what’s interesting this year is you’ve got the 60/40 model portfolio, which largely speaking is down, because both U.S. stocks are down and U.S. bonds are down, which is the reason why I think you want to have exposure towards other sectors and other parts of the world.”
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