Bitcoin ETFs Open Doors for Mainstream Investments, Projected Inflows Soar

With the recent introduction of Bitcoin ETFs on U.S. public markets, traditional money managers are poised to venture into the world of cryptocurrency, unlocking new avenues for the $30 trillion advised wealth management industry.

Analysts from Standard Chartered foresee a surge in fund inflows, estimating a substantial $50 billion to $100 billion influx in 2024. Notably, Bitcoin is gaining recognition as a benchmark asset for the younger generation, prompting industry experts to advocate its inclusion in diversified portfolios.

Anthony Pompliano, founder of Pomp Investments, emphasized the evolving role of Bitcoin, stating, “Bitcoin is beginning to become a benchmark asset for the younger generation. We know most investors can’t beat benchmarks, so adding the new benchmark to your asset allocation is the only way to try to keep up.”

Bitcoin’s recent price fluctuations have captured attention, with its value reaching as high as $49,000 before settling around $43,000. This surge, a 150% increase in 2023 following a challenging 2022, has heightened interest among investors who missed out on the previous rally.

According to Jan van Eck, CEO of VanEck, a significant portion of the investment community had been cautious about crypto due to its unregulated nature. However, a pivotal moment occurred when the Securities and Exchange Commission (SEC) cleared the sales of spot Bitcoin ETFs, enabling investors to engage with Bitcoin similarly to traditional stocks and bond index funds.

While SEC Chair Gary Gensler continues to issue warnings about crypto investments, the industry is undeterred. Mutual fund manager Advisors Preferred Trust, for instance, is investing up to 15% of its Hundredfold Select Alternatives Fund in indirect Bitcoin exposure through funds and futures contracts.

Highlighting the shift towards passive funds seeking improved performance, Pompliano noted, “Most passive funds are looking for ways to increase performance.” Bitwise Asset Management, among the 11 granted initial approval for a Bitcoin product, is targeting financial advisors and family offices with its Bitwise Bitcoin ETF, offering a competitive 0.2% fee of holdings.

Matt Hougan, Chief Investment Officer at Bitwise Asset Management, expressed optimism about the market potential, stating, “That includes RIAs [registered investment advisors] and includes, eventually, wirehouses — that is a many trillion dollar market.” Hougan revealed that financial advisors are increasingly allocating 1% to 5% of their portfolios to crypto, indicating a growing interest that has been waiting for the introduction of Bitcoin ETFs.

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