Bitcoin 2.0: What’s Next Following the Spot Approval?

John Stec, Global X ETFs, discusses digital asset adoption, spot Bitcoin ETFs, and how investors are aiming to manage volatility with theGlobal X Bitcoin Trend Strategy ETF (BTRN).

Authors' views and opinions are their own and not associated with CoinDesk Indices. This interview was conducted by CoinDesk Indices and is not associated with CoinDesk editorial.

What do general market participants and financial advisors see regarding digital asset adoption?

We’ve seen a tremendous amount of interest in the digital asset space and a corresponding rise in assets. There has been a significant uptick in the number of advisors either looking to allocate to this space or starting a due diligence process. Before 2024, we were roughly at what I call “15-15-70”: 15% of advisors and investors would never consider investing in crypto-themed or crypto-related securities, 15% were early adopters either buying for themselves or clients, and 70% were in a gray area where there wasn’t enough demand, interest, or knowledge to allocate to this space. But now that we have spot bitcoin ETFs and increased asset flows, we have broker-dealers and others looking to purchase Bitcoin ETFs, which we believe has significantly decreased that 70% number.

How have spot Bitcoin ETFs been received in the U.S. and internationally?

At a high-level internationally, several countries have successfully launched spot bitcoin ETFs that are similar to those in the U.S., while others have indicated that they’re in development In the U.S., an ETF wrapper seems to be the preferred vehicle for advisors and investors to access the asset class. We always joked that the “IPO” (Initial Public Offering) of Bitcoin would be the ETF, as this structure allowed easier access to the crypto landscape and opened doors that didn’t exist before. In the U.S., that was the starting point for a lot of people to view digital assets as more of an established asset class that deserved closer attention and consideration. We now have ETFs in place, investors can access them in their brokerage accounts, and the allocation process is very familiar to what they do across their portfolios. With the ETF wrapper, advisors have a simple, regulated, solution for clients to gain exposure to Bitcoin.

Is the audience Bitcoin ETFs primarily advisors or is it across the board?

We still see very heavy retail interest from investors who may not be working with a financial professional. If we think about digital assets and trying to own them individually, it’s still a pretty cumbersome process – there’s a heavy push for self-custody and owning those assets in your custodial possession, and that process can be very unwieldy and challenging for some. When you think about an ETF wrapper that gives you exposure to this space, it brings down what had been a pretty high barrier to entry. So, there’s very heavy interest from retail investors based on the ease of access that the ETF wrapper provides.

Can you dig a little bit into how investors are managing volatility and the Global X Bitcoin Trend Strategy ETF (BTRN)?

The Global X Bitcoin Trend Strategy ETF(BTRN) is constructed to assist in managing different market cycles by offering adaptive exposure to Bitcoin futures aligned with the current price trend of Bitcoin. The core concept of a trend strategy, which this ETF leverages, is that markets gradually react to news and shifts. BTRN aims to harness changes in market sentiment through a systematic and dynamic approach, and seeks to capture upside opportunities while reducing drawdowns compared to a strategy focused solely on Bitcoin futures. In short, we believe BTRN is the next generation of digital asset ETFs.

When we were looking at digital assets, we wanted to help address one of investors’ major concerns with Bitcoin, which is the volatility – was there a way to potentially participate in uptrends and move away or even fully exit your position and hold relatively stable security in significant downtrends? So, we were excited to bring BTRN to market, potentially allowing investors to participate in uptrends while aiming to mitigate any major downside moves by allocating to the Global X 1-3 Month T-Bill ETF (CLIP), a fund that invests in a basket of Treasury bills issued by the U.S. government that have a remaining maturity of at least 1 month but less than 3 months, based on trend signals. BTRN is the first ETF to use the CoinDesk Bitcoin Trend Indicator (BTI) signal, which is based on trend data back-tested over five years and calculated daily.

Are you finding that investors are generally buying and holding the ETF or are they moving in and out of it?

What we’ve seen from digital assets, and the messaging from a lot of managers who’ve brought products to this space, is we have a disruptive trend, and this trend may play out over multiple years. When most investors make an allocation, whether it’s 1% or 5% of their portfolios, they have the intention, I believe, that this is going to be a long-term strategic holding as opposed to trading tactically. Now, of course, you have a percentage of investors who are going to trade Bitcoin and other products more tactically, but I think for the most part investors want to strategically let it play out over several years.

What does the future look like for the digital asset marketplace?

Now that we have the first wave of digital assets and Bitcoin spot products, I think we’ll see an expansion of ways to gain exposure to Bitcoin markets. That can be something similar to the Global X Bitcoin Trend Strategy ETF (BTRN), where investors want to build a risk management strategy around Bitcoin. We may also see some income-producing vehicles around Bitcoin, as well. And then moving beyond Bitcoin, the path is likely to be into the next-largest token, which is Ethereum. With a pending Ethereum spot ETF launch, we believe this asset class may be positioned to have an upward growth trajectory, and as the years move on, we may see the acceptance of other products around different tokens. This could allow for other broad baskets of tokens very similar to what we saw with traditional ETFs. For example, with the S&P 500 Index, there are passive, leveraged, active, and income-producing products based off of it. That said, I think we’re just at the beginning of what we’re going to see from a product development standpoint.

Disclosures

All views and opinions expressed by the author are solely the author’s opinion and beliefs. The views and estimates contained herein are for general informational purposes only, are subject to change, and should not be relied upon as investment advice. It is not intended to be a forecast of future events or a guarantee of future results. Some of the statements may be forward-looking and contain certain risks and uncertainties. This information is not intended to be individual or personalized investment or tax advice and should not be used for trading purposes. Please consult a financial advisor or tax professional for more information regarding your investment and/or tax situation.

Bitcoin and bitcoin futures are a relatively new asset class. They are subject to unique and substantial risks, and historically, have been subject to significant price volatility. The value of an investment in the Fund could decline significantly and without warning, including to zero. You should be prepared to lose your entire investment.

Investing involves risk, including the possible loss of principal. BTRN invests in bitcoin futures contracts. The fund does not invest directly in or hold bitcoin. The price and performance of bitcoin futures should be expected to differ from the current “spot” price of bitcoin. These differences could be significant. Bitcoin futures are subject to margin requirements, collateral requirements, and other limits that may prevent the ETF from achieving its objective. Margin requirements for futures and costs associated with rolling (buying and selling) futures may have a negative impact on the fund’s performance and its ability to achieve its investment objective. BTRN is non-diversified.

Bitcoin is largely unregulated and bitcoin investments may be more susceptible to fraud and manipulation than more regulated investments. Bitcoin and bitcoin futures are subject to rapid price swings, including as a result of actions and statements by influencers and the media, changes in the supply of and demand for bitcoin and bitcoin futures contracts and other factors. Funds tied to bitcoin may not be suitable for all investors.

Fixed income securities are subject to loss of principal during periods of rising interest rates. Changes to the financial condition or credit rating of the U.S. Government may cause the value of the Fund’s investment in U.S. Treasury obligations to decline. CLIP is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemed from the fund. Brokerage commissions will reduce returns.

Carefully consider the Funds’ investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the fund’s full or summary prospectus, which may be obtained by visiting globalxetfs.com. Read the prospectus carefully before investing.

Global X Management Company LLC serves as an advisor to Global X Funds. The Funds are distributed by SEI Investments Distribution Co. (SIDCO), which is not affiliated with Global X Management Company LLC or Mirae Asset Global Investments. Global X Funds are not sponsored, endorsed, issued, sold or promoted by Solactive AG or CoinDesk, nor do these entities make any representations regarding the advisability of investing in the Global X Funds. Neither SIDCO, Global X nor Mirae Asset Global Investments are affiliated with these entities.