At the Bitcoin2024 conference, BlackRock’s head of digital assets talked about the firm's focus on Bitcoin (BTC) and Ethereum (ETH) ETFs as there is very limited client interest in other cryptocurrencies. Despite this, Franklin Templeton is still optimistic about expanding its crypto ETF offerings to include Solana (SOL). Meanwhile, Jersey City's mayor announced plans to invest a portion of the city’s pension fund in Bitcoin ETFs, while VanEck predicts Bitcoin could reach a $61 trillion market cap by 2050.

Limited Appetite for ETFs Outside BTC and ETH

At the Bitcoin 2024 conference on July 25 in Nashville, Robert Mitchnick, BlackRock’s head of digital assets, revealed that the firm sees very limited interest among its clients in cryptocurrencies beyond Bitcoin (BTC) and Ethereum (ETH). According to Mitchnick, BlackRock’s client base overwhelmingly favors Bitcoin, with some interest in Ethereum, but very little interest in other digital assets. 

BlackRock launched its first crypto ETFs, the iShares Bitcoin Trust (IBIT) in January and the iShares Ethereum Trust ETF (ETHA) in July. However, not all asset managers share BlackRock’s outlook. 

Franklin Templeton, which also issues BTC and ETH ETFs, is still optimistic about expanding its crypto ETF offerings, including a product for Solana (SOL). Franklin Templeton also shared its excitement about the potential of other cryptocurrencies to drive the industry forward in a recent post on X

Mitchnick pointed out that most of BlackRock’s clients view BTC and ETH as complementary rather than competitive assets. When clients buy ETH ETFs, they typically do so to enhance their existing crypto portfolio rather than to replace Bitcoin holdings. However, he warned that data on investor flows into the newly launched ETH ETFs is still very limited.

Mitchnick also touched on the fact that Bitcoin firmly owns the ”store of value” use case in the crypto space, while Ethereum pursues various applications that Bitcoin does not, which makes them more complementary. He predicts that investors will eventually allocate around 20% of their crypto holdings to Ethereum, with the remainder going to Bitcoin.

BlackRock’s crypto ETFs are among the industry’s most popular, with IBIT managing approximately $22 billion in assets under management (AUM) and ETHA approaching $270 million just days after its launch.

Client Demand Drives BlackRock's Bitcoin ETF Success

Client demand was the driving force behind the creation of Bitcoin ETFs, and these funds are just starting to gain momentum, according to Robert Mitchnick. At the Bitcoin 2024 event, Mitchnick was also interviewed by Bloomberg journalist James Seyffart. 

BlackRock CEO Larry Fink was originally a skeptic, but later underwent a big change in perspective on crypto. He even eventually referred to Bitcoin as ”digital gold.” Mitchnick credited Fink's thorough study of financial history, geopolitics, and technology for his shift in opinion, and he believes that Bitcoin's appeal is more accessible to those with a background in these areas.

Mitchnick stated that the inevitability of cryptocurrency as an asset class and technology, coupled with institutional-grade infrastructure and client demand, solidified BlackRock's entry into the crypto market. Seyffart pointed out that Bitcoin ETFs were the most successful ETF launches in history, with IBIT making massive contributions to BlackRock's revenue flow, ranking as the second most successful offering after the S&P500 ETF.

Direct investors initially drove demand for the Bitcoin ETF, while BlackRock's wealth advisory and institutional investors are gradually increasing their adoption. According to Mitchnick, large wealth advisory platforms like Morgan Stanley, UBS, and Merrill Lynch have yet to offer Bitcoin ETFs on a solicited basis, meaning they only provide the ETFs upon client request. Achieving solicited status typically takes years, although many platforms are accelerating their efforts.

Mitchnick expects some changes in the industry within the year, and revealed that BlackRock's Registered Independent Advisers who have adopted the ETFs are allocating 2-3% of funds to them. He also mentioned that institutions are still a bit cautious and are conducting extensive research and due diligence on new assets before they fully commit.

Jersey City Pension Fund Eyes Bitcoin ETF Investment

Steven Fulop, the mayor of Jersey City since 2013, announced that he plans to allocate a portion of the city’s pension fund to crypto ETFs. In a July 25 post on X, Mayor Fulop stated that the Jersey City pension fund was updating its paperwork with the United States Securities and Exchange Commission (SEC) to include an investment in Bitcoin ETFs. 

While he did not specify the exact percentage of the fund to be allocated to crypto, Fulop mentioned it would be similar to the 2% allocated by the Wisconsin Pension Fund.

Fulop is very optimistic about the long-term potential of crypto and blockchain technology, and even called blockchain one of the most significant technological innovations since the internet. In May, the State of Wisconsin Investment Board reported exposure to spot Bitcoin ETFs issued by Grayscale and BlackRock, totaling $164 million out of the board’s roughly $156 billion in assets.

The SEC approved the listing and trading of spot Bitcoin ETFs on US exchanges in January. So far, publicly-run pension funds considering crypto ETFs include those from Wisconsin and Jersey City. Mayor Fulop did not mention any plans to invest in spot Ethereum ETFs which started trading in the US on July 23.

Major financial institutions like Wells Fargo and JPMorgan Chase reported combined investments of less than $1 million in spot Bitcoin ETFs, which is a minuscule portion of their trillions of dollars in assets. Despite their size, this still proves that interest in ETFs are ever increasing from major players in the financial industry.

VanEck Predicts $61 Trillion Market Cap for Bitcoin by 2050

Investment manager VanEck projects that Bitcoin (BTC) could reach a total market capitalization of $61 trillion by 2050, translating to about $2.9 million per coin, driven by massive demand for the decentralized currency as collateral for trade settlement and a reserve for central banks. According to a July 24 report, VanEck envisions Bitcoin being used to settle 10% of global international trade and 5% of domestic trade, with central banks holding 2.5% of their assets in BTC.

The report also predicts that Bitcoin's scaling solutions, or Bitcoin layer 2s (L2s), could be worth about $7.6 trillion, or around 12% of Bitcoin’s total value. VanEck believes that emerging L2 solutions will resolve Bitcoin’s scalability issues, which have hindered its widespread adoption.

VanEck attributes the potential rise of Bitcoin to a decline in the dominance of leading economies like the United States, the European Union, and Japan, coupled with a loss of confidence in their currencies because of unrestricted deficit spending. The report suggests that in a climate of uncertainty, businesses and consumers will very likely look for a neutral medium of exchange with immutable property rights and predictable monetary policy, positioning Bitcoin as the perfect alternative.

The report also sheds some light on the declining use of the euro and Japanese yen in international settlements as a chance for Bitcoin's expanded use. The euro's share of cross-border payments has fallen from around 22% in the mid-2000s to 14.5% today, while the yen has decreased from 6.2% to 5.4% over the same period.

VanEck anticipates continued fiscal mismanagement and deterioration of property rights in major economies, which could lead to a shift away from fiat currencies. On the other hand, the report flags mining, scalability, and regulation as potential risks to Bitcoin’s adoption.

Despite gold's already established role as a global reserve asset, VanEck identifies logistical, security, and financial integration challenges as barriers to reverting to the gold standard.

Promising Bitcoin Lauer-2s (Source: VanEck)

While it is too early to declare winners among Bitcoin L2s, VanEck pointed out 16 promising projects, including the Lightning Network and Stacks, as part of Bitcoin’s future scalability solutions.