Institutional investment in cryptocurrency-related Exchange Traded Funds (ETFs) has not taken a hit despite the market’s roller coaster year. That is the outcome of a survey carried out by the boutique investment bank Brown Brothers Harriman & Co. Over 48% of the 325 ETF-focused institutional investors, financial advisers and fund managers surveyed said that they plan to add crypto-ETFs to their portfolio in 2023. This figure has dropped by 6 percentage points from the 54% recorded a year prior. However, a quarter of those already investing in such funds asserted that they will be increasing their commitment for the current year, a drop from 33% recorded in the corresponding duration.
Regulatory bodies like the EU’s Markets in Crypto Assets (MiCA) have importantly derisked crypto investments for asset managers and fund managers, making them more comfortable in engaging with crypto exchanges. Significantly, institutional investment interest in adding crypto-ETFs to their portfolios in 2023 is higher in the US (55%) and China (58%) than it is in Europe (29%).
In a separate study, 80% of advisers have maintained or increased client portfolios in the crypto space. The most direct avenue for such investors is equity ETFs, portfolios with multiple assets like the Amplify Investments’ Transformational Data Sharing ETF (BLOK) with assets of around $440 million. Bitcoin futures ETFs, which began entering US markets in October 2021, are also an option. Here, the biggest ETF is ProShares’ Bitcoin Strategy ETF (BITO) with assets adding up to $940 million. BITO invests in futures contracts on the CME, while the recently launched Bitwise Bitcoin Strategy Optimum Roll ETF (BITC) stands out in its selection strategy of futures contracts with the lowest level of contango.
Regulation remains one of the key hurdles in the space. Currently, US fund issuers have not gotten regulatory backing to launch funds to invest in BTC directly. This has led firms like Bitwise, whose proposal for a spot BTC ETF was declined last June, to explore other areas even if it meant that market entry will require long effort to win significant assets. Bitwise executives have expressed optimism for a spot BTC ETF once there is greater regulatory clarity. Such a move, they say, would be hugely beneficial for investors and the crypto market at large since the opportunity already exists in Canada, Germany, Sweden, and Brazil.
William Brown
- 2023-04-03
Institutional Investment Interest to Add Crypto-ETFs Persists
Despite the current market's roller-coaster performance, institutional investment interest in cryptocurrency-related Exchange Traded Funds (ETFs) has not taken a hit. A survey conducted by boutique investment bank Brown Brothers Harriman & Co suggested that 48% of the 325 surveyed ETF-focused institutional investors and fund managers plan to add crypto-ETFs in 2023.
