Exchange-traded fund investors are becoming even more interested in cryptocurrency exposure – and the emergence of things like bitcoin futures ETFs could lead to a demand explosion, says a CEO.
“The stars are adjusting right now to the demand for cryptocurrency allocation in the advisory environment when you look at 30 years of falling interest rates and … what it does with your interest rate allocation,” ETF Trends CEO Tom Lydon told CNBC’s ETF Edge this week.
“With inflation, with the demand for alternative investments and the current trend in the cryptocurrency area, there is a lot of pressure on advisers to take action,” he said in Monday’s interview.
81 percent of financial advisors said they received questions about crypto in 2020, up from 76% in 2019, in a survey conducted by Bitwise Asset Management and ETF Trends. The number of advisers allocating to crypto in their clients’ portfolios rose to 9.4% from 6.3%, the survey showed.
With ProShares and Valkyrie Fund’s new bitcoin futures ETFs already making waves, such products could be the key to unlocking trillions of dollars in investor demand, Lydon said.
“There’s this whole middle market where financial advisors manage about $ 20 trillion that really does not have the best solution right now. And right now, it looks like the futures-based ETF could be that,” he said. “This is really where most of the demand will come from.”
The US ETF market currently accounts for about $ 6.5 trillion in assets under management. The cryptocurrency opportunity for both ETF providers and advisors is significant: a $ 2 trillion market with 200 million users.
Add to that bitcoins ‘perceived hedging power against rising inflation – 25% of advisers saw it as an inflation hedge in Bitwise / ETF Trends’ survey this year, up from just 9% last year – and countries like El Salvador adopted it as currency, and crypto-craze is probably still in the early rounds, Lydon said.
“There are more people who want to get bitcoin in their hands somehow, and it does not seem to be declining any time soon,” he said.