Crypto Funds Double Down on Bitcoin and Ether Despite Market Downturn
Key Trends in Crypto Investment Products
A growing number of investment firms are launching exchange-traded products (ETPs) focused on Bitcoin and Ether, despite the significant decline in crypto prices over the past year. According to Morgan Stanley, half of the 180 active crypto ETPs and trust products globally have launched since the Bitcoin bear market began. These products allow investors to gain exposure to cryptocurrencies on regulated stock exchanges, eliminating the need for secure storage and reducing risks associated with hacks.
Focus on Top Cryptocurrencies
About 95% of these funds focus on Bitcoin and Ether, highlighting investor confidence in the two leading cryptocurrencies. While the total value of assets in the crypto ETP market has dropped 70% to $24 billion, net inflows for cryptocurrency investment products reached $453 million this year, with much of it directed toward Bitcoin and baskets of top cryptocurrencies.
Regulatory Challenges in the U.S.
Most active crypto ETPs are registered outside the U.S., with Switzerland, Canada, Australia, and Brazil leading in spot crypto offerings. U.S. regulators have rejected several applications for spot Bitcoin funds due to concerns over surveillance and market oversight. Meanwhile, futures-based funds remain popular but come with additional costs due to futures rollover.
Performance of Major Funds
Bitcoin has lost 17% in the past three months, while ProShares Bitcoin Strategy ETF, which tracks Bitcoin futures, has declined 21%. Grayscale Bitcoin Trust, the world's largest Bitcoin fund, has seen its assets under management (AUM) drop to $12.2 billion from over $30 billion at the end of 2021.
Optimism for the Future
Despite current challenges, industry experts remain optimistic about the long-term appeal of cryptocurrencies. The shift toward ETPs reflects a flight to quality, with investors favoring baskets of top crypto assets. While U.S. regulators have blocked spot Bitcoin ETFs, WisdomTree's head of digital assets expressed hope that an agreement could eventually be reached.
Global Expansion of Crypto ETPs
The proliferation of crypto ETPs underscores the resilience of investor interest in digital assets. As regulators worldwide race to approve spot crypto offerings, the market is expected to grow further, with a focus on regulated and secure investment vehicles.
The crypto winter has not deterred investment firms from betting on the future of Bitcoin and Ether, signaling confidence in the underlying technology and long-term potential of these elite cryptocurrencies.
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