Institutional Interest in Crypto ETFs Remains Strong, but Allocation Increase Slows, Finds Survey

A recent survey conducted by Brown Brothers Harriman (BBH), a financial services firm, has revealed that despite the cryptocurrency market being down 60% from its all-time highs, institutional interest in cryptocurrencies has not budged, with a majority of asset managers stating that they are “extremely interested” in crypto-themed Exchange Traded Funds (ETFs). The 2023 Global ETF Investor Survey polled 325 institutional investors, financial advisers, and fund managers from the United States, United Kingdom, Europe, and China.

Survey Findings

The following are the key findings of the survey:

• Nearly three-quarters of institutional investors claimed they’re “extremely” or “very” interested in crypto ETFs.
• Only a quarter said they are expecting to increase allocation to crypto ETFs over the next 12 months, a 6% fall from 2022.
• Nearly half of the fund managers surveyed plan to add crypto ETFs to their portfolios this year to diversify investments.

While crypto-themed ETFs fell down the priority list for some, BBH explains that the rise in interest for crypto ETFs is partly due to fund managers learning to stomach the inevitable volatilities in the crypto market. BBH believes a clearer crypto regulatory framework will further increase the demand for related ETF exposure as it will provide more “comfort” when doing business with the crypto sector.

The following are the highlights of the survey:

• More than 40% of the respondents claimed to manage assets worth more than $1 billion.
• Over half said to have more than a quarter of their portfolio invested in ETFs.

Among the largest crypto ETFs are ProShares Bitcoin Strategy (BITO), available on the New York Stock Exchange (NYSE), and the Bitwise 10 Crypto Index Fund (BITW). Grayscale’s Bitcoin Trust (GBTC), while not an ETF, is one of the largest digital asset investment products by market cap traded on a stock exchange, with a current value of $11 billion according to Google Finance.

However, not all crypto ETFs have fared well, as the effects of the crypto market winter saw two Australian crypto ETFs – BetaShares Crypto Innovators ETF (CRYP) and Cosmos Global Digital Miners Access ETF (DIGA) – take the title as the worst-performing ETFs in the country. This resulted in DIGA, along with Cosmos Purpose Ethereum Access ETF (CPET) and Cosmos Purpose Bitcoin Access ETF (CBTC), being delisted at the end of 2022.