With the number of tracked Crypto ETPs standing at 180 as of the end of February, it’s clear that digital assets are no longer fringe elements of the investment world but central to the evolving dynamics of global finance. According to an analysis by Fineqia International Inc., a digital asset and fintech investment service provider, the Assets Under Management (AUM) within Exchange Traded Products (ETPs) that are backed by digital assets has reached a historic high of $80.5 billion, marking a substantial 186% increase from the $28 billion recorded in February 2023.
This rise is particularly notable as it nearly doubles the growth rate of the underlying crypto assets themselves, which saw a 37% increase, rising to about $2.37 trillion in Feb.2024 from $1.73 trillion in Jan. 2024.
This disparity in growth rates underscores the increasing appeal of digital assets to traditional financial institutions, especially following the approval and trading commencement of Bitcoin (BTC) Spot Exchange Traded Funds (ETFs) in the United States on January 11.
These ETFs have been a crucial factor, drawing more capital inflows into digital asset ETPs and propelling their AUM to levels that surpass the previous peak of $58.5 billion at the end of 2021 by a notable 38%.
Fineqia’s CEO, Bundeep Singh Rangar, commented on this trend, suggesting that traditional fund managers who overlook Bitcoin’s impressive returns over the past decade do so at their own risk.
Rangar highlighted the legitimization of Bitcoin through spot ETFs, a likely ease in interest rates, and a diminishing token supply as key factors likely to sustain Bitcoin’s price increase.
This sentiment is echoed in the rapid uptake of spot BTC ETFs, with ten new funds, including those from major issuers like BlackRock, 21Shares, and Grayscale, attracting $7.4 billion in net inflows since their inception.
Notably, Grayscale’s Bitcoin ETF (GBTC) leads with approximately $26.5 billion in AUM, despite experiencing significant outflows prior to its conversion from a Trust to an ETF.
BlackRock’s Bitcoin ETF (IBIT) alone has amassed $10 billion in AUM in just two months, setting a record as the fastest ETF to achieve this milestone.
This is indicative of a larger trend where spot Bitcoin ETFs are increasingly regarded by investors as “digital gold,” driving up the price of Bitcoin in a manner unlike the traditional dynamics affecting physical gold prices.
The institutional race for Bitcoin, catalyzed by the high demand for ETFs, is significantly impacting the market by absorbing available BTC supply and consequently driving up prices. This has resulted in BTC-backed ETPs accounting for approximately 4.9% of the total BTC supply, with the ten newly introduced BTC Spot ETFs holding 3.9% of the supply, valued at $48.2 billion.
Furthermore, Ethereum (ETH) and other cryptocurrencies have also seen notable increases in their valuations and ETP AUMs, demonstrating the broadening interest in digital assets beyond Bitcoin. The SEC’s pending decisions on several ETH Spot ETF filings add another layer of anticipation to the market, with potential implications for Ethereum’s price and its broader adoption in the institutional investment landscape.
As the digital asset market continues to mature, the remarkable growth in ETP AUM highlights not only the increasing institutional acceptance of cryptocurrencies but also suggests a paradigm shift in investment strategies towards digital assets.
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