Institutions ‘extremely interested’ in crypto ETFs, but buying has cooled: Survey

Institutional interest in cryptocurrencies has not rekindled despite the market being down 60% from all-time highs (ATH), as a majority of asset managers said they are “extremely interested” in crypto-themed exchange-traded funds (ETFs).

On April 3, financial services firm Brown Brothers Harriman (BBH) published its 2023 Global ETF Investor Survey which surveyed 325 institutional investors, financial advisors and fund managers from the US, UK, Europe and China.

It found that nearly three-quarters of institutional investors claimed to be “extremely” or “very” interested in crypto ETFs, but the effects of the crypto winter have cooled their appetite as only a quarter said they expect to increase their allocation to crypto ETFs. over the next 12 months, a 6% drop from 2022.

While crypto-themed ETFs fell down the priority list for some – nearly half still plan to “add” crypto ETFs to their portfolios this year to diversify their investments.

BBH explained that the rise in interest in crypto ETFs is partly due to fund managers learning to withstand the inevitable volatilities of the crypto market:

“As investors adapt to volatility, they are diversifying their portfolios and adding more innovative products. Even with a turbulent year in crypto, interest has not completely cooled.”

BBH believes a clearer crypto-regulatory framework will further increase demand for related ETF exposure, as it will provide more “comfort” when doing business with the crypto sector:

“Initiatives such as the draft regulation from the EU proposal on Markets in Crypto Assets are expected to significantly ‘de-risk’ investments in crypto assets for asset managers and provide an ‘additional layer of comfort’ for fund managers to engage with crypto exchanges.”

More than 40% of respondents claimed to manage assets worth more than $1 billion, and over half said they have more than a quarter of their portfolio invested in ETFs.

Related: Samsung’s investment arm launches Bitcoin Futures ETF amid growing crypto interest

Among the largest crypto ETFs are the ProShares Bitcoin Strategy (BITO) available on the New York Stock Exchange (NYSE) and the Bitwise 10 Crypto Index Fund (BITW). BITO was reportedly the first bitcoin-linked ETF to launch in the US, while BITW tracks the top 10 cryptocurrencies by market capitalization.

Grayscale’s Bitcoin Trust (GBTC), although not an ETF, is one of the largest digital asset investment products by market capitalization traded on an exchange with a current value of $11 billion according to Google Finance.

Not all crypto ETFs have fared well, as the impact of the crypto market over the winter saw two Australian crypto ETFs – BetaShares Crypto Innovators ETF (CRYP) and Cosmos Global Digital Miners Access ETF (DIGA) – take the title of worst performers The ETFs in countries.

It resulted in DIGA, along with Cosmos Purpose Ethereum Access ETF (CPET) and Cosmos Purpose Bitcoin Access ETF (CBTC) being delisted at the end of 2022.

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