New mix of bitcoin buyers bode well for ecosystem: Franklin Templeton exec

Franklin Templeton’s crypto-focused research director remains optimistic about the future of the space despite recent outflows from bitcoin ETFs.

In an interview with Blockworks, Christopher Jensen highlighted the emergence of new buyer types as a positive indicator for long-term growth.

Jensen also said the recent Bitcoin halving exposed gaps in clients’ understanding of cryptocurrency. He emphasized Franklin Templeton’s commitment to bridging these educational shortfalls, aiming to increase client knowledge and engagement in Web3.

This need for education comes at what could prove a critical time for the US bitcoin ETF market. The US boasts 11 spot bitcoin ETF funds, which allow participants to gain bitcoin exposure via traditional investment vehicles without buying and holding the crypto asset themselves.

Despite seeing $12 billion of net inflows to date, these funds have collectively endured net outflows across three straight weeks for the first time since launching in January. The ETFs bled $328 million in assets from April 22 to April 26, according to data from Farside Investors.

Jensen noted that increased geopolitical concerns and the belief that interest rates could stay higher for longer are likely contributors to the demand halt.

But the journey of understanding digital assets is an educational process that takes time, he added.

“There are lots of platforms, there are lots of institutions that are interested and are doing work,” Jensen explained. “So we don’t think the flows for the ETPs are done even though they’ve cooled off in recent weeks.”

Franklin Templeton — a fund group with roughly $1.5 trillion in assets under management — has not gathered assets for its BTC fund as well as most of its competitors. The Franklin Bitcoin ETF (EZBC) had $330 million in assets under management, well behind inflow leaders BlackRock and Fidelity — which have bitcoin ETFs managing roughly $17.7 billion and $10.2 billion, respectively.

The Grayscale Bitcoin Trust ETF (GBTC) leads the segment with $19.4 billion in assets despite seeing net outflows on every trading day since hitting the market.

“Because it’s onboarding platforms one at a time, you’re in the kind of whale-hunting business rather than just opening it up and letting lots of small fish come in,” Jensen said.

Wealth management firm Cetera Financial Group last month started allowing its advisers to allocate to four spot bitcoin ETFs, including EZBC.

Industry watchers have said they expect a new wave of bitcoin ETF inflows as more investment firms and platforms greenlight the use of such products for clients.

The mix of buyers is also important, Jensen said — with more institutional buyers starting to allocate to bitcoin via the ETF. Such investors tend to be okay buying the dip as they diversify into the new asset class, he added.

“I think with that traditional ETF wrapper it’s really now perceived as this is part of [their] investment portfolio,” Jensen said. “This isn’t a short-term trade; [they’re] really thinking about this in terms of [their] long-term investment portfolio.”

Outside of ETFs, Franklin Templeton said this week that institutional investors could now transfer shares of the OnChain US Government Money Fund it launched in 2021 to other shareholders.

The fund was the first US-registered fund to use a public blockchain to process transactions and record share ownership.

The new functionality comes as the tokenization of funds and real-world assets picks up steam.

“I think elsewhere in the industry you find some partnerships and some outsourcing for various pieces of this,” Jensen said. “But for us, this has all been in-house, and so this kind of playbook…you could absolutely envision being done with our other products.”

Keep reading for more excerpts from Blockworks’ interview with Jensen.

Blockworks: What do you make of bitcoin reaching a new all-time high price before this year’s Bitcoin halving, which was different from prior cycles?

Jensen: Pulling forward price action — that historically you see after — this time around…have we pulled forward a bulk, or a majority? I think that’s a question that’s been on people’s minds.

Our interpretation of this was it was great to see some price action going into the halving. This time it wasn’t just excitement around the halving; it was actual fundamentals in terms of new buying demand and new flows coming from the ETP complex.

When you layer that, on the demand side, with now the halving, which is on the supply side, that becomes interesting.

Blockworks: How educated are Franklin Templeton clients when it comes to crypto and the Bitcoin halving that just occurred?

Jensen: It’s on people’s radar, but I think once you dig into those conversations, there’s a mixture of where people are at in their understanding.

I think not a lot of people appreciate that already 94% of the bitcoin that will ever be produced is in circulation. This is going to keep happening every four years for over a hundred years more before we get to the full 21 million.

Sometimes there’s confusion of okay we’re on this set, programmatic schedule, but can it change? Can [bitcoin’s hard cap of 21 million coins] become 25 million?

There’s a lack of understanding of just what it means for it to be programmatically determined in the actual open-source code that’s on all these machines around the world. It is fixed, it is finite, it is capped.

Blockworks: Based on your conversations, what might remain a concern for those considering an allocation to bitcoin?

Jensen: The fact that the spot ETFs were approved in the US — not only is it important for opening up that door, but that regulatory stamp of approval really means a lot. And so that has certainly helped that part of the conversation.

One consideration that comes up is almost the simplicity of bitcoin and the fact that it is used and valued mostly for its store-of-value characteristics.

A lot of times, [an investor will say] ‘with Ethereum, I understand that it generates revenues and has a yield and it looks more like a [traditional finance] asset.’

And so sometimes the hang-up with bitcoin is that simplicity. If it’s just a store of value…why should I get excited about that when I’m not really excited about other store-of-value assets?

Blockworks: What other areas of the crypto and blockchain is Franklin Templeton exploring?

Jensen: You see asset management and payments coming closer together through the use of blockchain technology. I think that’s a theme that will continue.

Another area we really like — because it touches the real world — is this sector of decentralized physical infrastructure networks and using token incentives to bootstrap networks…whether it’s mapping, or data, or AI or cell phone coverage.

So it’s interesting the role that maybe an asset manager might [play]. From an investing standpoint I think that sector’s interesting, and also from a way to crowdsource ideas.

This interview was edited for clarity and brevity.

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