Crypto Assets Under Management Will Surge Thirteenfold in Five Years To $650 Billion, Bernstein Says

Updated: 26 September 2023

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Crypto fund managers are poised to see assets under management surge as much as 13-fold in the next five years as the approval of spot crypto exchange traded funds (ETFs) fuels exponential growth.

That’s the view of research firm Bernstein, which says the crypto fund management industry is on the cusp of a transformation from a “cottage industry’’ into a sector with $50 billion in revenues over the period.

“Crypto financial adoption follows hype cycles, and we expect a hockey stick adoption,” said Bernstein analysts led by Gautam Chhugani, referring to the shape of the growth trajectory. They added that 2024 will be ”the landmark regulatory year for approval of ETFs.”

In the next 5 years, the capital in crypto funds may increase from $50 billion to $650 billion according to Bernstein analysts.

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— WhaleFUD (@WhaleFUD) September 26, 2023

Bernstein’s prediction comes hard on the heels of applications for spot Bitcoin ETFs by money management titans that include BlackRock and Fidelity. Cathie Wood’s Ark Invest and 21Shares recently entered the race to launch a spot Ethereum ETF, ramping up pressure on the Securities and Exchange Commission (SEC) to approve spot crypto products after it lost a legal showdown over the issue.

The spot Ether ETF applications followed a landmark legal victory for Grayscale, when a court called the SEC’s decision to approve Bitcoin futures ETFs, but not spot Bitcoin ETFs, “arbitrary and capricious.’’

The court also agreed with Grayscale that spot Bitcoin ETFs are “materially similar’’ to Bitcoin futures ETFs already approved by the SEC. The assets underlying a spot Bitcoin ETF are highly correlated with those underlying a spot Bitcoin futures ETF, it said.

Crypto Assets Soared After Court Ruling

Crypto assets soared on the news and the ruling prompted JPMorgan to say approval of a spot Bitcoin ETF is more likely. Former SEC chair Jay Clayton says approval is ‘’inevitable.’’ Still, the SEC has delayed a decision on the applications for seven spot Bitcoin ETFs until next month at the earliest.

Bernstein said it expects to see a rise in demand for crypto funds driven by wealth and private banking-integrated products, investment advisors, and other industry participants. This would lead to easier access to ETFs in direct broker accounts, which would, in turn, encourage more investors to interact with it, bringing a lot more money to the crypto sector overall, it said.