Why demand for crypto ETPs continues to rise despite market downturn
Exchange-traded products (ETPs) based on crypto have continued to grow in number, despite the decline in the underlying markets.
About half of the more than 180 crypto ETPs currently available were launched after Bitcoin began its significant depreciation over the past 11 months, since its peak last November.
According to a recent note from Morgan Stanley, this indicates that investment firms remain confident that cryptocurrencies, as well as blockchain technology, will eventually come to the fore, despite the struggles the market has experienced this year.
A report by KPMG described a similar phenomenon taking place with cryptocurrency companies.
What is the appeal of crypto ETPs?
Crypto-based ETPs have proven popular because they provide exposure to the volatile digital assets without investors having to worry about other complications surrounding the technology.
These range from having to understand the implications of personally managing a digital wallet, to keeping crypto safe from hacks and fraudulent schemes.
Digital asset investment products have seen inflows totaling $481 million so far this year, according to the latest report from CoinShares.
While data from Morgan Stanley claims that 95% of the 180 available cryptocurrencies are devoted to the top two cryptocurrencies, Bitcoin and Ethereum, other data gives a more nuanced impression.
According to one expert, there has been an increasing amount of asset allocation to funds that combine some of the largest cryptocurrencies by market capitalization, in addition to just Bitcoin and Ethereum.
CoinShares data also revealed a growing share of inflows targeting products based on altcoins such as Solana, Cardano and Ripple’s XRP.
Meltdown sees market fall 70%
Yet, while the availability of these crypto products appears to be expanding, the total value of the market has shrunk by around 70% to $24 billion over the past year. This has been reflected in the prices of some of the most prominent products based on Bitcoin.
Grayscale Bitcoin Trust, the largest Bitcoin fund in the world, saw its total assets under management fall 34% from $30 million last year to $12.2 billion.
Meanwhile, the ProShares Bitcoin Strategy ETF, one of the few crypto ETPs offered in the U.S. as it tracks Bitcoin futures instead of spot, also saw its assets under management (AuM) drop to just $600 million at the end of September. ., after pulling in over $1 billion during its debut last year.
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