The approval of the Bitcoin Spot exchange-traded fund (ETF) in January introduced significant institutional capital into the digital asset market, according to new research conducted by digital asset infrastructure provider Aspen Digital in collaboration with the Family Office Association. This has boosted the sector’s reputation. Partnered with Hong Kong advisory firm SBI Digital Markets.
Henri Arslanian
Nine Blocks Capital
“Today, if you are an allocator, there is definitely an element of career risk in investing in cryptocurrencies,” Henri Arslanian, co-founder of crypto hedge fund Nine Blocks Capital, told Asian Investor. told. Since the adoption of Bitcoin ETF. ”
The survey, which surveyed more than 80 family offices, high net worth individuals and asset managers in Asia, showed that 76% of respondents are currently investing in digital assets, compared to KPMG’s 2016 survey. This is higher than the 58% recorded in a similar study. 2022.
The impact of Bitcoin ETFs has been significant, with BlackRock’s iShares Bitcoin Trust ETF (IBIT) reaching $10 billion in assets under management in its first 49 days on the market, according to observers.
Institutional awareness is also contributing to the positive outlook for the market, with 31% of respondents expecting the price of Bitcoin to reach at least $100,000 by the end of Q4 2024.
“In my opinion, the bullish outlook for Bitcoin prices and cryptocurrencies is based on an improving liquidity outlook, surging institutional demand for spot ETFs, and an emerging crypto narrative,” said Aspen Digital. Matthew Lam, head of research, told Asian Investor.
Historically, the cryptocurrency industry has shown strong price performance in October and also in the fourth quarter, he added.
In-facility custody
Institutional investors have traditionally struggled to store Bitcoin due to security risks, regulatory compliance, and the technical complexity of managing the password “private keys” that enable access to crypto assets.
The infrastructure required to securely store transactions while maintaining transaction efficiency was inadequate by institutional standards.
Matthew Lamb
aspen digital
“Unlike the traditional private asset sector, the cryptocurrency space lacks a dedicated digital asset management platform that caters to the needs of private assets and institutions,” Lam said.
He added that due to the complexity of the fragmented sector, family offices are typically interested in educated wealth managers who can manage their digital asset holdings.
“Some family offices have started hiring in-house investment managers to invest in the digital asset space,” Lam added.
The approval of Spot Bitcoin ETFs largely solves this problem by allowing institutions to gain Bitcoin exposure through familiar, regulated means without having to deal with direct custody.
A recent survey showed that 53% of respondents currently have digital asset exposure through funds or ETFs.
Source: Aspen Digital
One Hong Kong-based family office investor surveyed said the approval of Spot ETFs gives legitimacy to digital assets and allows them to invest in cryptocurrencies without setting up a new wallet or managing private keys. He said he could touch it.
room for growth
Despite the growing interest in digital assets, for the majority of respondents (70%), digital assets make up less than 5% of their overall portfolio.
“Although most family offices consider digital assets as one of their alternative investments, the allocation remains trivial as the majority of their portfolios are allocated to traditional financial products,” Lam said. said.
According to the survey, 90% of respondents cited investment returns as an important factor in investing in digital assets. Meanwhile, 71% see it as a diversification tool and 36% see it as a hedge against inflation.
Source: Aspen Digital, Galaxy Digital
Nine Blocks’ Arslanian believes there is little doubt that institutional investors will continue to enter the cryptocurrency space.
“I think there will be big changes in the asset management sector, where large asset managers and hedge funds will need to have a crypto sleeve,” Arslanian said.
“This trend will be driven by several factors: regulatory clarity, an institutional-level ecosystem from custodians to exchanges, and products like Bitcoin ETFs continuing to attract new players to the market. “This will increase liquidity and trading volumes,” he added.
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