The crypto fund management industry is set to experience significant growth in the coming years, with the potential to be worth over $500 billion in assets by 2026, according to estimates from Bernstein.
Currently estimated to be around $45-50 billion, the crypto fund management industry is expected to transition from a cottage industry to a formal, regulated asset management industry with assets worth $500-650 billion within the next five years, according to analysts at Bernstein.
The increasing demand for crypto fund management is expected to come from investment advisors, wealth and private banking products, as well as the easy access to bitcoin ETFs in direct broker accounts. Analysts predict a 10% ETF share for bitcoin and ETH market cap and a 5-6% share for liquid crypto hedge funds.
The chances of a bitcoin ETF approval have been significantly improved by the filings from traditional heavyweights such as Blackrock and Fidelity. Two courts have also sided, or partially sided, with crypto companies, including Ripple. Furthermore, the recent Grayscale case, in which a panel of judges asked the Securities and Exchange Commission (SEC) to review Grayscale’s application to convert its Bitcoin Trust (GBTC) to a bitcoin ETF, has increased the likelihood of approval by early 2024.
The SEC, which delayed a set of bitcoin ETF decisions to October, is expected to take a more favorable stance towards the proposals, particularly since they are being made by traditional fund managers and the agreements are with regulated exchanges like Nasdaq. Analysts believe the SEC will opt for the “middle route” and get comfortable with the surveillance sharing agreement with Coinbase.
In addition to the potential growth in the crypto fund management industry, analysts at Bernstein highlighted the significant opportunities presented by stablecoins, particularly in terms of tokenization and payments adoption. They believe that the real opportunity for stablecoins lies in their transformation from offshore-unregulated-crypto to onshore, regulated forms that can be more directly integrated with mainstream payment platforms and global settlement systems.
Overall, the crypto fund management industry is poised for substantial growth in the coming years. With increasing demand from various sectors and the potential for regulatory approvals, the industry could see its assets soar to over $500 billion by 2026. This growth is further supported by the expanding opportunities presented by stablecoins and their integration with mainstream payment platforms.
