Three-quarters of professional investors are not yet invested in cryptocurrencies, but about half of them are considering entering the market via exchange-traded products (ETPs). ETPs are fund structures that allow investors to gain exposure to a single asset or a basket of different assets. In this case, the assets are cryptocurrencies. The investors’ preference for ETPs seems to stem from the convenience of using a fund wrapper rather than dealing with digital wallets.
A recent study by Trackinsight, with help from JPMorgan Asset Management and State Street, surveyed 549 professional investors and fund selectors who manage approximately $900 billion across ETF strategies. The findings reveal that 75% of respondents don’t have exposure to the crypto sector, while 48% would consider investing in single-token ETPs, and 47% would be interested in ETPs offering exposure to more than one crypto asset.
Direct investment in cryptocurrencies is, however, less appealing, according to the study, with only 37% of respondents indicating interest in this approach. Approximately 23% of professional investors stated they would not consider investing in cryptocurrencies at all.
Frank Koudelka, a global ETF product specialist at State Street, said the survey highlights “megatrends” observed by the company as the world’s largest servicer of exchange traded funds. Koudelka notes that many professional investors consider small allocations to cryptocurrency as an uncorrelated asset class that can make sense in a portfolio. With the recent surge in Bitcoin prices, there appears to be growing interest in cryptocurrency investment through ETF structures.
The survey also found that the majority of respondents are mainly interested in the two largest assets: 59% are invested in or would consider allocating to Bitcoin (BTC), while 49% would look at Ethereum (ETH). The SEC has not yet approved a Bitcoin ETF, but it did allow Bitcoin futures ETFs to enter the market in October 2021.
As the crypto market evolves and attracts more attention, fund groups such as Grayscale Investments are seeking new types of crypto products. Grayscale recently filed for three new ETFs, including one that would invest in ETPs listed on major non-US exchanges backed by physical Bitcoin and mining companies. Similarly, NEOS, a firm focusing on options-based income ETFs, filed to launch a Bitcoin High Income ETF. Other asset managers like Bitwise Asset Management, Direxion, and Roundhill Investments are also working towards offering products for investments in Ether futures contracts.
As the cryptocurrency market continues to expand and mature, more professional investors are likely to consider entering through various investment vehicles, including ETPs. This growing interest highlights both the potential of the market and the increasing need for secure, easy-to-use investment structures.
Source: Blockworks
