Bitcoin ETFs may unleash a $30 trillion asset management industry.

Following the approval of spot bitcoin ETFs, analysts at Standard Chartered anticipate fund inflows in the range of $50 billion to $100 billion in 2024.

0 790

Large money managers that were kept out of crypto may now trade bitcoin ETFs on U.S. public marketplaces.

For the $30 trillion advised wealth management sector, floodgates may open. In 2024, Standard Chartered analysts expect $50 billion to $100 billion in fund inflows.

“Bitcoin is starting to establish itself as a standard asset for the younger demographic,” said Pomp Investments founder Anthony Pompliano. We realize most investors can’t beat benchmarks, so adding the new benchmark to your asset allocation is the only way to compete.

Bitcoin reached $49,000 on Thursday, its highest level since December 2021, before falling to $43,000 on Friday. It rose 150% last year after a devastating 2022 selloff.

Much of the investing world missed the 2023 rise. VanEck CEO Jan van Eck stated that many fiduciaries, financial advisors, and banks were advised against dealing with crypto owing to its uncontrolled nature.

That changed Wednesday when the SEC approved spot bitcoin ETF sales, allowing investors to buy bitcoin-like stock and bond index funds. SEC Chair Gary Gensler warns against crypto investments, yet activity persists.

A recent prospectus from mutual fund management Advisors Preferred Trust states that up to 15% of Hundredfold Select Alternatives Fund assets are invested in bitcoin funds and futures contracts.

Pompliano adds “Most passive funds are looking for ways to increase performance.”

Bitwise Asset Management is one of 11 Bitcoin issuers approved initially. Chief Investment Officer Matt Hougan said the Bitwise Bitcoin ETF, with the lowest cost at 0.2% of holdings, targets financial advisers and family offices.

Advisors, including RIAs and wirehouses, are progressively allocating 1% to 5% of the trillion-dollar market, according to Hougan. “We know they’re interested in crypto and waiting for an ETF.”

Bitwise surveyed financial advisers in partnership with VettaFi, a data-driven ETF platform, and discovered that 88% of advisors interested in buying bitcoin waited until a spot bitcoin ETF was authorized. Large crypto portfolio allocations (more than 3%) quadrupled to 47% in 2023 among advisers who invest in crypto.

“A low-cost bitcoin ETF is going to be the easiest way for most people,” Hougan added.

Robinhood data shows that 81% of Bitcoin ETF trading traffic in the first week was in individual accounts, while the rest was in retirement accounts.

The 2022 CFA Institute Investor Trust Study identified crypto involvement in 94% of state and local pension systems before the SEC’s statement Wednesday. New products may provide retirement plans that wish to boost allocation greater credibility and decrease expenses.

Financial firms advise on entering the space differently.

Galaxy Digital said on its website in October that portfolios with 0% to 1% bitcoin investment had the “strongest marginal improvement”. According to WisdomTree, adding bitcoin to a 60% stocks and 40% bonds portfolio “can improve the risk-return profile” and that “even a one percent allocation led to an 8.3% outperformance versus the base portfolio” from 2014 to 2019.

Fidelity found that “bitcoin boosted a portfolio’s returns during specific periods in the past, though it also came with substantial volatility” to mid-2022. Bitcoin has not performed well as an inflation hedge, although the business recognized that “assessing this was challenging, given that inflation has been low throughout most of Bitcoin’s history.”

Castle Island Ventures founder Matt Walsh, who oversaw Fidelity Investments’ blockchain and crypto asset activities, said high-growth tech stock funds will be the first to enter the market. But he sees broader appeal.

Walsh suggested it may appear in commodity-based portfolios like gold-based funds that view it as digital gold.

Leave A Reply

Your email address will not be published.