Bloomberg – Even beyond the launch of the first US bitcoin futures ETF, crypto funds achieved some notable global milestones in 2021.
The number of crypto-tracking investment vehicles around the world more than doubled – hitting 80 from just 35 in late 2020, according to data from Bloomberg Intelligence. Assets soared to $ 63 billion, compared to $ 24 billion at the beginning of the year.
Cryptocurrencies are claiming a growing share of the global investment landscape as concerns about inflation mount and speculative forces continue to creep in (despite the sometimes spooky volatility). Bitcoin, the world’s largest cryptocurrency, suffered a 56% drop between April and June before hitting an all-time high in November, only to drop more than 30% in the following weeks. But that has done little to reduce a record rush of cash into the ecosystem.
“Globally, it’s a phenomenon that’s starting to take off,” said Leah Wald, CEO of crypto-asset manager Valkyrie Investments, on Bloomberg’s “QuickTake Stock” streaming show. “If you look at the inflows from a volume perspective, not only has it been stable even with the price corrections that bitcoin is notoriously famous for, but it is seeing many institutions enter the world.”
Grayscale Investments LLC is the largest asset manager in the digital asset space, ranking the $ 30 billion Grayscale Bitcoin Trust as the world’s largest crypto fund. Fund providers like Galaxy Digital Holdings and Michael Novogratz’s Bitwise Asset Management also control billions .
While the majority of 2021 fund launches were outside of the US, the October debut of the ProShares Bitcoin Strategy ETF (BITO ticker) was the one that garnered the most attention. It took just two days for the fund to accumulate $ 1 billion, making it one of the busiest startups for a registered ETF. The initial surge in interest showed the degree of pent-up demand for cryptocurrency exposure among US investors in ETFs. And yet, unlike an ETF connected directly to spot bitcoin, these futures-backed products are vulnerable to so-called renewal costs associated with managing contracts. Investor demand is likely to be even higher if physically-backed funds were allowed to launch in the US, according to Bloomberg Intelligence.
“I can’t help but think that the assets in this space would be even higher if we had more efficient structures, like spot ETFs, in the US,” said James Seyffart, ETF analyst at Bloomberg Intelligence.
Flows into the ProShares fund have stalled and the ETF has fallen more than 30% since its launch in mid-October. Meanwhile, similar products from Valkyrie and VanEck have less than $ 70 million in combined assets.
Valkyrie’s Wald is optimistic that flows will pick up in 2022. Institutional money managers are likely waiting to see how the US futures-backed ETF handles renewal costs, he said.
“That specific vehicle, I think a lot of money managers want to see the metrics before they jump in,” Wald said. “We are excited about what is in store for us next year.”