Crypto gets a lot of shade in traditional finance circles. Less so these days, and as a reporter on the crypto beat, one of the best examples of the mainstreaming of the digital asset business came last week at the annual Exchange ETF Conference sponsored by the biggest money management firms in the world.
From what I saw, crypto didn't just have a seat at the so-called adult table of investing; it was the featured guest. And, it speaks volumes about the evolution of the industry that has seen its share of downs and now ups following the recent regulatory approval of 11 spot bitcoin ETFs that now give retail investors exposure to the world’s largest digital asset.
The conference, which has been held annually for about a decade, is sponsored by ETF providers like State Street, Vanguard, Invesco and BlackRock. Exchange-traded funds, or ETFs, are pooled assets that are bought and sold through a brokerage firm and traded on exchanges. They give investors access to a wide variety of asset classes at a relatively low cost and little risk.
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Financial advisers from around the world converge on Miami Beach’s luxury Fontainebleau Hotel to engage with the best and brightest minds shaping the future of the $7.3 trillion ETF business.
Yes, usually lots of insider ETF baseball, until the bitcoin fund began dominating the news with its approval by the crypto skeptic Securities and Exchange Commission Chairman Gary Gensler, and a huge assist from Wall Street titans like BlackRock's Larry Fink.
When Larry Fink speaks, people listen. He once called bitcoin an "index of money laundering." Now he calls it a "store of value." Gensler is no match for the king of Wall Street, as Fink is known, since BlackRock is the world's largest money manager with some $10 trillion in assets under management.
"Financial advisers who have been coming to this conference for nearly a decade told me the crypto crowd unequivocally brought the buzz this year," said Mark Connors, director of research at Toronto investment firm 3iQ Corp.
Proof of this: The discussion on the spot bitcoin ETFs was the most well-attended panel of the entire conference, so much so that the staff ran out of the headphones attendees were provided with to listen to the speakers. There was barely an empty seat in the house as executives from crypto asset managers Grayscale, Bitwise and Galaxy took the stage to speak about their successful ETF launches.
"On investment bank trading desks, you can tell when someone is about to close a significant transaction, one which they’ve worked on a long time with an uncertain outcome. A small crowd forms, including some new friends who ‘believed in this trade from the start,’" said Andy Baehr, Coindesk’s head of product. "The bitcoin panel on the main stage at Exchange felt like that. Not an empty seat to be found. Not a smirk nor an eye roll in sight. Just admirers of $35-plus billion of brand-new ETF assets and the trailblazers who made it happen. Never in doubt, never in doubt!"
Another topic financial advisers were keen to discuss: whether the SEC would take the next big leap of faith and approve a spot ethereum ETF.
Ethereum is the second-largest digital currency in the world behind bitcoin.
Based on the many conversations I had with industry participants in both crypto and traditional financial circles, the general sentiment about the SEC approval of a spot ethereum ETF in the coming months was largely positive.
The SEC’s deadline to approve or deny an application from tech investor Cathie Wood’s company Ark Invest (partnering with 21Shares) to launch its ethereum spot ETF, is approaching in May.
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During the bitcoin panel discussion, Grayscale’s head of ETFs, Dave Lavelle, was asked whether the company would sue the SEC again if it denied Grayscale’s request to convert its Ethereum Trust into a spot ETF.
Lavelle said Grayscale would "have to wait and see and look at the facts," adding that he put the odds of approval at 50% by May.
Grayscale is credited with ultimately getting the spot bitcoin ETFs over the finish line and paving the way for Wall Street behemoths like BlackRock and Fidelity to offer bitcoin exposure to their clients after it successfully sued the SEC last year for denying its application to turn its GBTC Bitcoin Trust into a spot ETF.
In August, an appeals court ruled in favor of Grayscale when it called the SEC’s denial "arbitrary and capricious," directing Wall Street’s top cop to take another look at Grayscale’s petition.
Four months later, the SEC approved the launch of 11 bitcoin spot ETFs on the same day, a watershed moment for the crypto industry, finally granting it access to Wall Street.
The crypto industry has since hailed Grayscale as a hero for laying the groundwork for this historic event and the company’s triumph was reflected at the conference.
The firm was one of the biggest and most visible sponsors of the event. Its booth, located directly in the center of the expo hall, was by far the most eye-appealing of all the company displays. The lanyards on the conference admission badges were adorned with Grayscale’s logo. The company even put on a drone light show one evening where the bitcoin logo and the Grayscale name lit up the sky over Miami Beach.
"Trading desks are known for ‘victory laps’ after big wins, and it would be tempting to put that label on Grayscale’s awesome drone light show on the final night of the conference," said Andy Behr, Coindesk’s head of product. "But, in truth, it felt more like an invitation: crypto is a real thing now, friends new and old. Come with us and let’s make this even bigger."
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Representatives from companies with bitcoin ETFs tell me they were inundated with questions from financial advisers, some of whom are not yet allowed to recommend the bitcoin products to clients as their firms want to do their "due diligence" on the products and how they’ve been trading before rolling them out to clients.
"I’d be surprised in the next year if the top 10 wirehouses are not involved in this," said Steve Kurz, global head of Galaxy Asset Management. "We will probably see institutional FOMO."
