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Could you pass a bitcoin test? Plus, flows turn negative.

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Today's newsletter is 1,002 words, a 4-minute read.

1 big thing: ๐Ÿ“š Passing the bitcoin test

Illustration: Natalie Peeples/Axios

Bitcoin is more accessible than ever with the January launch of spot ETFs, but before some investment pros can even talk about those flashy new tools, they have to do their homework... and maybe even pass a test.

Why it matters: Waning enthusiasm around the bitcoin ETFs expressed by recent outflows threatens to fade the Year of Bitcoin โ€” but that could change given the effort underway.

The big picture: The next wave of ETF interest will reportedly include pension funds, endowments and at least one major brokerage platform.

  • But institutional ๐ŸŠ adoption requires a great deal of education.
  • When spot bitcoin ETFs debuted, some advisers and adviser networks got to work immediately, but even those efforts have required time.

Zoom in: San Diego-based Cetera Financial Group, which has roughly 13,000 affiliated wealth advisers, was one of them, according to Matt Fries, head of investment products at the firm.

  • The firm was aware of client demand around the bitcoin ETFs โ€” albeit from a "specific type of investor" โ€” and wanted to "find a way to get comfortable" with offering the products on their platform, he says.
  • He described it as an all-hands situation, in which various parts of the firm got to work โ€” analyzing the 11 spot bitcoin ETFs available, thinking about risk controls around exposure, and how to educate/train their advisers.

How it worked: Cetera issued a policy announcement in mid-March, which detailed how its affiliated advisers could use the four selected bitcoin ETFs on its platform.

  • Ahead of that announcement, some of the more gung-ho advisers completed required training and passed a test, Fries says, adding that their supervisors also had to complete training.

Still, there are certain conditions โ€” spot bitcoin ETFs are only allowed to be used in commission-based accounts, and not on advisory accounts where advisers would collect a fee.

  • There are also limits on how much can be parked in them.

Cetera's goal isn't to push bitcoin, it's to push bitcoin education.

  • "What we want is to provide advisers with clients asking those questions tools to have an educated conversation around that."

The bottom line: The first wave of adoption for bitcoin ETFs may have hit a wall. The next wave of growth will likely be fueled by another source.

2. ๐Ÿค  An RIA chief describes what it's like to be early

Chad Koehn, chief of registered investment adviser United Capital Management, described the picture that usually hangs behind him during his Zoom meetings โ€” a burning $100 bill.

  • "Bitcoin is still a dangerous topic even today," he says, adding that it's easy to "get stereotyped," and that he's not a maxi in the same breath.

Catch up quick: Koehn's Salina, Kansas-based firm got attention last month for its just-under 5% holding of Fidelity Wise Origin Bitcoin Fund (FBTC), but he tells Axios in an interview that it was a bit of a misunderstanding.

  • UCM was already in crypto โ€” it was just moving assets to FBTC from an existing bitcoin position in a different ETF.

UCM is an RIA โ€” meaning it has a fiduciary duty to offer advice in its clients' interest โ€” and is investing in bitcoin ETFs for its discretionary assets under management.

Zoom in: Koehn said getting into crypto requires guts and resolve.

  • "It's probably our rugged individualism, upbringing, that attracts us to this from the very beginning," he said, adding: "I tell people all the time... it's still a cold and lonely world in this space."

3. ๐ŸšชCharted: ETF flows

Column chart showing Net flows of Bitcoin ETFs weekly from Jan. 8, 2024, to April 29, 2024. The highest during this time period was February 26 when it hit $2.1 billion. The week of April 29, it was -$899 million.
Data: hildobby's Dune;ย Chart: Tory Lysik/Axios Visuals

Bitcoin ETFs hit the skids last month as the price of the world's largest digital asset did the herky-jerky.

What's happening: Flows turned negative โ€” last week, the group saw $899 million of outflows, according to Hildebert Mouliรฉ's Dune dashboard.

Of note: There is a gray, er, silver lining in that cloud.

  • Grayscale Investments' GBTC recently broke its streak of outflows.
  • It remains the largest bitcoin ETF with BlackRock's iShares Bitcoin Trust (IBIT) closing in, but still second to GBTC in terms of assets under management.

๐Ÿ’ญ Crystal's thought bubble: It's not the beginning of the end, though some seem to think that a seasonal investment maxim โ€” sell in May and go away โ€” is in play.

  • Reality check: Flows move with performance, so if bitcoin continues to post gains, fresh money will likely return too.

4. ๐Ÿšด Catch up quick

Illustration: Annelise Capossela/Axios

๐Ÿน Robinhood disclosed a Wells Notice from the SEC, signaling a potential enforcement action. (Axios)

๐Ÿฆ‹ Social network Bluesky is searching for a new board member after Block's Jack Dorsey (who helped launch the network while he was leading Twitter) stepped down. (Bluesky)

๐Ÿงฎ The billionth transaction occurred Sunday on the Bitcoin network. (The Block)

๐Ÿฅธ Visa invented a new way of counting stablecoin transactions and reported that 90% of them aren't from real users. (Bloomberg)

5. ๐Ÿšฉ Culture hash: Don't take their word for it

Illustration: Lindsey Bailey/Axios

At this point, when a founder dismisses concerns about their project with the lingo "FUD" (fear, uncertainty and doubt), that's a bad sign, not a good sign.

  • A man associated with a project that, not so long ago, was fond of throwing around "FUD" to dismiss concerns, has been arrested in the Netherlands.

Between the lines: ZKasino, a purported gambling platform, had moved $33 million of users' funds onto Lido, a staking service, with a long lockup.

  • ZKasino billed itself as a new kind of gaming app that used zero-knowledge proofs and EigenLayer technology.
  • Looking at its underlying code, though, the team at Rekt News reports that neither of those things were true.

It had its own blockchain, and it asked users to bridge cryptocurrency from Ethereum to its chain to earn staking rewards in its native token ZKAS.

  • However, users watched in woe as their assets in the bridge moved to Lido instead, where they had no access to them.

Flashback: Blockchain sleuth ZachXBT had warned potential backers about red flags in the project in December.

The bottom line: If a commentator or news organization with no financial interest in a project raises concerns about something, it probably makes sense to at least hear them out.

  • A founder always stands to benefit by dismissing criticism of the thing they made.

This newsletter was edited by Pete Gannon and copy edited by Carolyn DiPaolo.

How was everyone's Cinco de Mayo โ€” BTC got a bump over the weekend. โ€”B & C