- Cryptocurrency exchange-traded products (ETPs) have experienced a 91% increase in assets under management (AUM) in 2023, significantly outperforming the growth of underlying digital assets.
- Bitcoin’s dominance in ETPs and anticipation of a U.S. spot Bitcoin ETF have been key factors in the surge of crypto ETPs.
Rapid Growth of Crypto Exchange-Traded Products in 2023
The year 2023 has marked a significant upswing in the realm of cryptocurrency exchange-traded products (ETPs), with these financial instruments outpacing the growth of the cryptocurrencies they are based on.
A Surge in Assets Under Management
Fineqia, a digital asset platform, reports a striking 91% increase in the total assets under management (AUM) of crypto-based ETPs from January to October 2023. This surge has been led by issuers such as 21Shares, Grayscale, and CoinShares. Comparatively, cryptocurrencies themselves have seen a slower growth rate of around 70% over the same period.
The Role of Bitcoin in ETPs
The disproportionate growth in crypto ETPs can be attributed to Bitcoin’s larger share within these products compared to its overall market presence. While Bitcoin accounts for 75% of total crypto ETP AUM, its market share has hovered around 50% in the broader crypto market, as per CoinGecko data.
Market Dynamics and the Anticipation of a Spot Bitcoin ETF
Bitcoin has been a prominent performer in the crypto market, with a 104% surge from January 1 to October 31, 2023. This growth has been a significant driver for the increased valuation of Bitcoin-centric ETPs. In contrast, Ether (ETH) recorded a 50% increase over the same period.
Potential Impact of a U.S. Spot Bitcoin ETF
Fineqia CEO Bundeep Singh Rangar emphasizes the market’s response to the anticipated approval of a spot Bitcoin ETF in the United States. The excitement surrounding this potential development is seen as a major catalyst for the growth in crypto ETP AUM, which reached $38 billion in October 2023, marking the highest figure since May 2022. This increase in ETP AUM reflects broader market optimism, with the total cryptocurrency market capitalization rising 17% in October.
Regulatory Landscape and Future Prospects
The U.S. Securities and Exchange Commission (SEC) is currently reviewing several spot Bitcoin ETF applications from firms like 21Shares and WisdomTree. Recent delays in decisions on these applications suggest a cautious regulatory approach, with new deadlines set for early 2024.
The rapid growth of cryptocurrency exchange-traded products in 2023 highlights the evolving landscape of crypto investments. With Bitcoin’s dominance in ETPs and the market’s anticipation of a U.S. spot Bitcoin ETF, these financial products are emerging as significant players in the digital asset space. As the regulatory environment continues to evolve, the trajectory of crypto ETPs and their impact on the broader crypto market will be closely watched.