Crypto ETFs Beyond Bitcoin See Growing Advisor Interest
Financial advisors seeking crypto exposure beyond Bitcoin ETFs are driving demand for diversified digital asset products, according to industry executives who say the conversation has evolved from whether to include crypto to how to construct portfolios with multiple tokens.
The shift reflects growing sophistication among advisors who have moved past initial Bitcoin allocations and now seek broader exposure to capture the crypto market’s evolution, according to David LaValle, global head of ETFs at Grayscale Investments, during a recent Digital Assets Council of Financial Professionals webinar, How to Secure Truly Diversified Crypto Exposure.
LaValle said that since Bitcoin exchange-traded funds launched, most discussions have focused heavily on Bitcoin and Ethereum. But “once you get over the hump of what Bitcoin is, the conversation shifts to something that’s more about portfolio construction,” he explained during the Wednesday session.
The discussion comes as Bitcoin ETFs have attracted more than $50 billion in assets since launching in January 2024. LaValle noted that current crypto allocations among wealth management clients represent just 0.04% of portfolios, suggesting room for growth toward the 1% allocation many advisors target.
But building diversified crypto portfolios presents unique challenges, according to Andrew Baehr, head of product at CoinDesk Indices, who warned that traditional correlation metrics can mislead crypto investors. For example, the CoinDesk 5 Index shows a 0.9 correlation with the CoinDesk 80 Index despite wildly different performance this year.
“Correlation can be very deceiving,” Baehr explained. “CoinDesk 5 is up about 12% to 13% on the year, and CoinDesk 80 is down 38%, yet they’re identically correlated.”
Grayscale currently offers the CoinDesk 5 Index through its Grayscale Digital Large Cap Fund (GDLC), which tracks Bitcoin, Ethereum and three other top tokens by market capitalization, according to LaValle. The fund trades over the counter and has received Securities and Exchange Commission approval for exchange listing, pending a full commission vote.
The CoinDesk 5 Index captures 81% of the total crypto market while excluding assets that fail liquidity, custody or regulatory screening, according to Baehr. The index uses quarterly rebalancing and market-cap weighting similar to equity benchmarks.
LaValle emphasized that institutional-grade infrastructure has become crucial for wealth management adoption. The regulatory environment shift from “massive headwinds” to “industry tailwinds” has accelerated adoption, he added.
For advisors questioning individual token selection, both executives advocated index-based approaches. “When you hear ‘token’ in crypto, replace that word with software,” LaValle suggested. “There are high-quality pieces of software that are going to succeed and compete and pieces of software that are going to fail.”