Bitcoin is Not a Threat, But an Opportunity, Says Franklin Templeton CEO
Franklin Templeton, one of the world’s largest asset managers, has announced its plans to launch a spot Bitcoin ETF, a move that signals its bullish stance on the cryptocurrency market.
In an interview with CNBC on Jan. 19, Franklin Templeton CEO Jenny Johnson said that her firm decided to launch a spot Bitcoin ETF because there is a lot of “escalating demand” for the flagship cryptocurrency from both institutional and retail investors.
Johnson dismissed the notion that she was not supportive of Bitcoin or cryptocurrency as false, saying that “Bitcoin is just one of the suite of what we think are opportunities here.”
Johnson’s comments are noteworthy, considering that Franklin Templeton manages roughly $1.4 trillion in assets and has been around for 76 years. The firm is known for its expertise in fixed income, equity, and alternative investments, and has a global presence in over 30 countries.
The announcement also highlights the growing acceptance of Bitcoin as a viable investment option among mainstream traditional financial firms, as more and more of them are launching or planning to launch Bitcoin-related products and services.
Johnson said that the launch of Franklin Templeton’s Bitcoin ETF is a strategic response to the increased use of Bitcoin in transactions and its integration into the broader financial system. She added that the technology underpinning Bitcoin and other cryptocurrencies has created “diverse and novel investment opportunities” that will continue to evolve.
Johnson also echoed the views of BlackRock CEO Larry Fink, who recently said that Bitcoin could serve as a hedge against oppressive governments and inflation. Johnson shared insights into how Bitcoin serves as a safety net for individuals in unstable regimes, who turn to Bitcoin after the government confiscates their assets or when they face sudden and violent inflation.
“There is a fear component to it that is considered almost an insurance or a safety component,” Johnson said.
Franklin Templeton’s Bitcoin ETF will be a spot Bitcoin ETF, meaning that it will track the price of Bitcoin itself, by holding and storing the cryptocurrency directly. This is different from the Bitcoin futures ETFs, which track the price of Bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME).
A spot Bitcoin ETF is considered to be more direct, efficient, and regulated than a Bitcoin futures ETF, as it avoids the extra fees and risks associated with futures contracts. However, a spot Bitcoin ETF also faces more regulatory hurdles and challenges, as the SEC has been reluctant to approve such products in the past.
Franklin Templeton’s Bitcoin ETF is one of the 11 spot Bitcoin ETFs that were approved by the SEC on Jan. 10, following a successful lawsuit by Grayscale, the sponsor of GBTC. GBTC, formerly known as Grayscale Bitcoin Trust, was the largest and oldest Bitcoin investment product, but it faced several challenges, such as trading at a significant discount to its net asset value (NAV) and losing market share to Bitcoin futures ETFs.
Grayscale converted GBTC into a spot Bitcoin ETF, becoming the first and largest of its kind in the world. The other 10 spot Bitcoin ETFs, which include products from BlackRock, Fidelity, and ARK Invest, began trading on Jan. 11.
The approval of spot Bitcoin ETFs was widely seen as a positive development for the crypto industry, as it would provide investors with a more direct, efficient, and regulated way to access Bitcoin. However, the impact of spot Bitcoin ETFs on the performance and flows of GBTC and Bitcoin futures ETFs remains to be seen.
According to Eric Balchunas, Senior ETF Analyst for Bloomberg, the spot Bitcoin ETFs have seen strong inflows and growth in assets under management (AUM) since their launch, while GBTC has seen massive outflows and decline in AUM.
Balchunas tweeted on Jan. 20 that the spot Bitcoin ETFs collectively received $623 million in net inflows on Friday, Jan. 19, marking their third best day since inception. The total net flows for the spot Bitcoin ETFs stood at $1.2 billion, while their AUM reached $4 billion, up from $2.5 billion at the end of 2023.
In contrast, GBTC saw a $590 million outflow on Friday, bringing its total net outflows to $2.8 billion since October 2021. GBTC’s AUM dropped to $26 billion, down from $32 billion at the end of 2023.
Balchunas noted that the outflows from GBTC were not necessarily going to the spot Bitcoin ETFs, as much of it was driven by FTX, a crypto exchange that offered a way to arbitrage the discount of GBTC to its NAV. FTX allowed traders to buy GBTC at a discount, sell a synthetic version of GBTC at NAV, and lock in the profit.
Balchunas also suggested that the inflows to the spot Bitcoin ETFs were largely due to their reach, distribution, and hustle, rather than their inherent advantages over GBTC. He said that the proportionality of the flows to the size of the firm was almost perfect, indicating that the larger and more established ETF providers, such as BlackRock, Fidelity, and ARK Invest, had more success in attracting investors.
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