In the multi-trillion-dollar investment product sector, stable fund crypto that holds Bitcoin and other digital tokens is hardly a blip on the radar. According to Bernstein Research, this will begin to change shortly – and swiftly.
Analysts led by Gautam Chhugani predict that the crypto asset management sector will be worth $500 billion to $650 billion in the next five years, up from around $50 billion currently.
According to a statement sent on Monday, several factors contribute to their optimism. The first potential is the approval of a spot Bitcoin exchange-traded fund. The Securities and Exchange Commission erred in denying Grayscale Investments’ petition to convert the Grayscale Bitcoin Trust (GBTC) into an ETF, a court concluded last month.
The SEC has until mid-October to file an appeal against the verdict; at the same time, the agency must determine whether to approve or deny applications from other fund providers that would clear the way for their own Bitcoin products.
If the SEC relents, the Bitcoin funds may be available as early as early next year, with the Bernstein team expecting the ETFs to capture around 10% of the market capitalizations of Bitcoin and Ether, the second-largest cryptocurrency.
Analysts said that cryptocurrency financial acceptance follows hype cycles, and they anticipate a hockey stick adoption, with 2024 serving as a watershed regulatory year for ETF certification.
Recently, there have been signals that certain institutions are warming to cryptocurrency despite retail traders having all but vanished from trading platforms such as Coinbase Global (COIN).
Along with Grayscale, other firms such as BlackRock (BLK), Fidelity, WisdomTree (WT), Invesco (IVZ), and others have applied to develop Bitcoin ETFs. Some hedge funds are also looking to develop products that hold spot Ethereum or Ethereum-linked futures.
PayPal Holdings (PYPL) and Visa (V) have also introduced tokens or announced agreements to strengthen their links to the crypto sector.
However, many institutions are still hampered by regulations. Despite the SEC’s court losses, SEC Chair Gary Gensler maintains that the crypto business is riddled with fraud and organizations that don’t comply with securities rules. The SEC sued Coinbase in June for operating as an unregistered securities exchange, which the firm disputes.
Legislators aren’t doing anything to support the sector. While measures to reform the crypto business laws may pass the House of Representatives this year, the Senate has shown little enthusiasm in picking up the work of stable fund crypto.
Bernstein analysts believe the spate of enforcement actions is coming to an end despite the lack of legislation. The Coinbase case would offer further clarification, they said, adding that the meat of regulatory backlash is done for the time being.